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Connected Manufacturing

Thought-provoking essays from industry leaders Edited by Craig Hartman, Robbert Kuppens, and Dirk Schlesinger

Thought-provoking essays from industry leaders
Edited by

Harry Forbes David W. Humphrey

Joseph Pinto

James G. Berges

John Cataldo Bernie Anger

Manufacturing industries face unprecedented challenges. New competitors are emerging from countries such as China and India; incumbent companies are beginning to reap benefits from global supply chains; and customers are demanding customized products. To survive, manufacturers must reduce costs by standardizing processes and products globally, while responding flexibly to the needs of customers regionally. The way forward is a shift to next-generation manufacturing. Only by using the latest technological developments can manufacturers establish processes and methodologies to support a competitive, global business.

Craig Hartman Robbert Kuppens Dirk Schlesinger

Paul Mullen

Christian Verstraete

Connected Manufacturing


“Connected Manufacturing gives us new best practices and insights from some of the world’s leading Zygmunt Mierdorf METRO GROUP companies. This is a timely and important book.”
Tadao Takahashi

Dieter May Christian Suttner


Juha Räisänen

“Connected Manufacturing boasts a remarkable collection of industry leaders and is a highly Michel Gornet readable book.” RENAULT
Sujeet Chand



Connected Manufacturing contains viewpoints and advice from several of the manufacturing industry’s most innovative executives. Editors Craig Hartman, Robbert Kuppens, and Dirk Schlesinger examine global manufacturing markets and share the experiences of pioneers who embrace the core principles of next-generation manufacturing to achieve sustainable, competitive advantages.

Cover photograph © Andy Sacks / Getty Images

I S B N 0-9550411-4-7

December 2006 Price $19.00 £9.99



780955 041143

Connected Manufacturing

Thought-provoking essays from industry leaders
Edited by Craig Hartman, Robbert Kuppens, and Dr. Dirk Schlesinger


The Cisco® Internet Business Solutions Group (IBSG), the global strategic consulting arm of Cisco, helps Global 500 companies and public organizations transform the way they do business—first by designing innovative business processes, and then by integrating advanced technologies into visionary roadmaps that improve customer experience and revenue growth. The Cisco IBSG Global Manufacturing Practice provides trusted, independent advice to senior business executives from some of the world’s largest manufacturing companies. IBSG helps customers improve their businesses through innovative programs and approaches targeting both new revenue generation and operational expenditure reduction. The Global Manufacturing Practice consists of a team of seasoned advisers drawn from the industry and the world’s top management consulting firms.

Introduction: Next-generation manufacturing: a connected approach
Dr. Dirk Schlesinger, Senior Director, Manufacturing, Internet Business Solutions Group (IBSG), CISCO, GERMANY


Using technology innovation to provide world-class customer support
Joseph Pinto, Senior Vice President, Technical Support Services, CISCO, UNITED STATES

30 42
The Connected Series consists of a collection of opinions that are intended for general interest only and are in no way intended to be a formal or definitive statement of fact and as such should not be relied upon. Any opinions set out in the Connected Series are those of the authors only and, unless expressly stated otherwise, are not the opinions of Cisco. To the maximum extent permitted by applicable law, Cisco is not responsible for and expressly disclaims any liability for damages of any kind arising in any way from use of, reference to, or reliance on the Connected Series.

Driving business innovation with enabling technologies

Driving innovation to power the world
John Cataldo, General Manager, Marketing and Commercial Operations, Optimization and Control, GE ENERGY, UNITED STATES Bernie Anger, General Manager, Technology, Optimization and Control, GE ENERGY, UNITED STATES


Digital services for healthcare: technology that enables the human touch
Paul Mullen, Global Program Manager, Digital Services, GE HEALTHCARE, UNITED STATES

Published by Premium Publishing 27 Bassein Park Road London W12 9RW United Kingdom First published 2006 Copyright © 2006 Cisco Systems, Inc. All rights reserved. Cisco, Cisco Systems, and the Cisco logo are registered trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. No part of this publication may be reproduced (including photocopying), stored, or introduced into a retrieval system of any nature or transmitted in any form or by any means without the prior knowledge and written permission of the copyright owner and the above publisher of the book.

ISBN 0-9550411-4-7 A catalogue record for this book is available from the British Library Special thanks to the executive sponsors: Gary Bridge and Toby Burton Thank you to: Marc Girardot, Ronald van Zanten, Paul Hewitt, and Charles Stucki Edited by Craig Hartman, Robbert Kuppens, and Dr. Dirk Schlesinger


The promise of RFID in the manufacturing value chain: “Eating your own dog food”
Dieter May, Senior Vice President, Corporate Strategy, INFINEON TECHNOLOGIES AG, GERMANY Christian Suttner, Vice President, Emerging Business, INFINEON TECHNOLOGIES AG, GERMANY


Producing the right products at the right time: steps toward mass-customisation
Juha Räisänen, Vice President and Head of Delivery Solutions, Demand Supply Network Development, NOKIA CORPORATION, FINLAND

94 Developing an adaptive supply chain through partner collaboration Christian Verstraete.. UNITED STATES 110 Expectations of manufacturers: connecting demand side with supply side Zygmunt Mierdorf. INC. ARC ADVISORY GROUP David W Humphrey. HEWLETT-PACKARD COMPANY. LTD. Advanced Technology. Manufacturing and Supply Chain.SECTION 2: CONNECTED SUPPLY 82 Industrial IP and Ethernet come of age Harry Forbes. Executive Vice President. Manufacturing. Senior Analyst. GERMANY 118 Nissan manufacturing: back in the black Tadao Takahashi. NISSAN MOTOR CO. RENAULT S. Chief Technical Officer and Senior Vice President. Senior Analyst. Chief Information Officer.. FRANCE 130 Benefiting from global supply-chain integration Sujeet Chand.. ROCKWELL AUTOMATION. GERMANY . Senior Director.. ARC ADVISORY GROUP. Executive Vice President. JAPAN 124 Manufacturing is the heart of our business Michel Gornet.A. Manufacturing and Distribution Industry Solutions. METRO GROUP. UNITED STATES INTRODUCTION .

GERMANY 3 . We find specific examples from around the world. Plus. Dirk Schlesinger SENIOR DIRECTOR. from suppliers to plants to sales-channel partners. CEMEX S. integrates tracking and fleet management technologies to meet customer delivery requirements within 20 minutes. as we see in Figure 1. radio frequency identification (RFID) devices. and broadband Internet—to name a few—to tackle these challenges. de C. TECHNOLOGY ALSO HAS ADVANCED. competitive advantage. Mexico’s leading cement manufacturer. integrated enterprise resource planning (ERP) software. Manufacturers now have large-scale databases. Emerson Electric Co. how manufacturers are emphasizing bidirectional information-sharing through the global manufacturing value chain—from research and development (R&D) to the customer and back. Dr. GE Healthcare collects X-ray machine performance data online to reduce repair times and anticipate customer lifecycles. Tectonic shifts in the global economy have created important new competitors—and huge new markets in emerging countries. user demands for wider and more tailored products are forcing manufacturers to innovate faster and develop greater intimacy with end customers. Kia Motors America moves manufacturing from “low-cost” Korea to cheaper facilities in Slovakia. CISCO.. today they face unprecedented challenges.A. They show. These examples demonstrate a shift to next-generation manufacturing. AT THE SAME TIME.V . designs and manufactures core product modules in China and then customizes them locally. INTERNET BUSINESS SOLUTIONS GROUP (IBSG). Boeing invests in Moscow engineering facilities to develop the 787 Dreamliner. MANUFACTURING.NOW IS THE TIME for companies to embrace the core principles of next-generation manufacturing and use them to achieve a sustainable. Next-generation manufacturing: a connected approach WHILE GLOBAL MANUFACTURERS HAVE FOR YEARS USED TECHNOLOGY to increase productivity and improve customer service. and conversely.

2005. not only to capital-intensive ones. and in-house R&D. improving the flow of information to improve decision making and accelerate processes. as we see in Figure 2. the left side of the chain. Most manufacturing companies. global and applies to all functions. manufacturing. is tightly connected to the right side of the chain. • Connected supply embraces all company functions and relevant partner functions around the world. Figure 2 Complexity masters are more than three times more profitable than runner-ups. • Innovation in new product development requires integration of inputs from multiple sources. In order to invest effectively in new products.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION Next-generation manufacturing Profiting from global value-chain capabilities Complexity masters 73% more profitable Research Design Build Distribute Sell Maintain Customer Partner Ecosystem High (37%) 17% more profitable (7%) INNOVATION Global customer and channel feedback Global value-chain complexity Note: size of circles represents share of companies surveyed Integrate Globally Dispersed R&D CONNECTED SUPPLY CHAIN Localized Products/ Business Models (49% of respondents) 100% = base 19% more profitable (7%) Access to Resources That Can Prevent and Solve Customer Issues CUSTOMER INTIMACY Low Low Value-chain capabilities High Figure 1 Bidirectional flow of information in next-generation manufacturing ecosystem. where customer interactions take place. have yet to establish the processes and methodologies that support a truly effective global business. the Cisco Internet Business Solutions Group (IBSG) has developed a framework to describe the approach these first movers are taking. 5 . suppliers. information moves in both directions and across traditional functions and organizations. used with permission. and sales. While goods flow from left to right. where raw innovation occurs. superior profitability can be enjoyed by creating value chains on a worldwide scale and mastering the complexities of global sourcing. by definition. including customers. research indicates that early adopters of these principles are benefiting financially and separating themselves from competitors. It consists of three building blocks: • Customer intimacy allows organizations to differentiate the customer experience in order to cross-sell. 2003. Each value chain includes multiple partners and customers. original equipment manufacturers. with information flowing between these different parties and across country and regional boundaries. and maximize loyalty. In fact. The supply chain is. Moreover. 4 Working with leading companies in high technology and industrial goods. Cisco. Deloitte. however. up-sell.

the manufactured goods and will have a perspective on how they can be improved. This information must then be translated into product and service innovation. Leading manufacturers have already put this combination of innovation and customer intimacy into action. can be engineered to include new connectivity capabilities. build them in China. as measured by R&D spend divided by total revenues. Driving revenues by combining customer intimacy and innovation As consumers demand more choice and flexibility. In fact. by training and developing customer-facing employees. 2003.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION As Figure 3 illustrates. Connected Products 4. Next-generation manufacturing cycles To Drive Revenues To Reduce Costs 1. Seamlessly connecting basic products to services opens a vast range of possibilities for manufacturers. Companies that capitalize on this kind of product differentiation can expect to command a price premium of up to 15 percent. Apple is evolving into the platform of choice for Web-based personal content management. In other words. which give valuable information on usage patterns and customer lifecycle events. has outsourced a number of noncustomer-facing manufacturing activities to focus on its core strengths. does not correlate with financial success. while connected supply is aimed at cost reduction. leading manufacturers are deploying Customer Interaction Networks * Peak Performance in Innovation—Rules for Success for R&D Management in the Manufacturing Industry. Boston Consulting Group. or contributes to. Research by The Boston Consulting Group* shows that emphasis on R&D spending. More sophisticated products.” increased Apple’s computer sales by 26 percent. In fact. because each one uses. Interactions with customers can be enriched by streamlining self-service and feedback processes. competitive advantage. Apple enjoyed 85 percent market share in the music data download market and. truly successful. Ideally. Cisco. Rather. the essays in this book feature several companies that have developed such an overarching vision and painstakingly assembled the pieces needed to make it work. customer intimacy and innovation provide a platform to enhance revenues. Interactive Research and Design INNOVATION + CUSTOMER INTIMACY CONNECTED SUPPLY While information-capture and analysis are critical to developing customer intimacy. Sensor-Intensive Supply Chain • Connected products. innovation needs to develop organically from multiple sources within the extended global value chain. all of the potential sources of innovation—customers. manufacturers need to understand their needs and requirements. cost-effective. This makes sense if we consider that effective innovation and efficient innovation also are functions of how it occurs. for example. In an effort to improve the customer experience at every touch point. suppliers. 2005. As a result. one-stop environment for end users. Customer Interaction Network 6. and ship them to configuration centers around the world for customization according to local requirements. 6 7 . with a “halo effect. Emerson. based on IBSG analysis. in fact. Figure 3 Integrated value cycles improve profitability. and by taking advantage of the kinds of interactive technologies Cisco has deployed in its own sales and service operations. Intelligent Device Monitoring 5. Organizational or geographical silos make it difficult for companies to focus on innovation and tend to prevent cross-pollination of ideas. easy-to-use. It uses a lowercost Chinese team to design a new generation of products. DesignManufacturing Simulation 2. original equipment manufacturers (OEMs). next-generation manufacturers link all three components to create a sustainable. • Customer Interaction Network. using three approaches: 3. The Apple iPod together with iTunes pioneered this approach to create a legal. While many organizations excel at individual pieces of this framework. they are not enough. and in-house R&D—need to be embraced. they must achieve and sustain customer intimacy.

including MRI and X-ray machines. computer-aided design tools to simulate how its 787 aircraft will be assembled. has harnessed technologies such as IP-based communications to migrate all of its call centers into a virtual contact center. It speeds up manufacturing and supply processes. teaming up with more than 20 major partners to produce its next-generation 787 aircraft. The technology allows the company to monitor its devices. computed tomography used for CAT scans. track operating parameters. and quickly replicated. IDM has created opportunities for new. For GE Healthcare. creating an electronic blueprint that can then be optimized. and often unsynchronized data. GE Healthcare has implemented IDM in its medical equipment. globalization allows for faster. uses laser technologies to scan an existing factory floor. Cisco created significant savings through productivity benefits while decreasing average talk time by more than 30 percent.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION to enable lifecycle support across a complex array of services. who are geographically distributed across four continents and 10 time zones. telephone. The results of the project dramatically affect the bottom line. which concentrate on processes related to component and product manufacturing. 8 9 . As a result. delivered by OEMs and channel partners. By doing so. To drive global adoption of design and manufacturing processes. connected supply is about improving the flow of information among all stakeholders. To do this. and manage their supply chains: • Intelligent Device Management (IDM). • Interactive R&D—global. Boeing is Controlling costs through connected supply The cost containment part of the next-generation manufacturing framework focuses on the supply cycle. and provide proactive maintenance and support. valueadded services that have helped it double service revenue. the time and cost required to design and build new factories can be significantly reduced. from sales to customer service. Two-thirds of the 787 will be designed and produced by Boeing’s partners. across all geographies. The remote management of products has evolved from basic monitoring to sophisticated performance management and information analysis. long before the aircraft is built. • Simulated manufacturing environments. By reducing hospital repair times. Boeing also uses integrated. and reusable parts with real-time voice and video communications across a secure network. and other diagnostic equipment. and serviced. Such globalization does not require so much rigid standardization of functions or business processes as it does a precise definition of how partners should interact—and which information needs to be exchanged to ensure that best practices are implemented around the world. and added US$100. leading players are creating simulated manufacturing environments that enable rapid propagation of best practices and real-time collaboration. while providing real-time visibility into the information they need to perform their roles. more inclusive decision making. without losing the specific advantages of different regions across which the supply chain might be spread. or in person—and across each kind of interaction. using simulation tools. In addition to enhancing the customer experience. benefiting both GE Healthcare and its customers. Unlike traditional approaches to supply-chain optimization. GE Healthcare has cut downtime by 40 percent. virtualized engineering. Boeing built a global collaboration design environment using a vast IT network that enables distributed teams to interact as if they were sitting in the same room. using technology to improve design. perform expert diagnostics. Instead of working on multiple. duplicate. e-mail. For instance. improve fuel efficiency up to 10 percent. By creating factory layouts and flows following the same set of rules.000 in revenue as a result of its IDM capabilities. operated. engineers can exchange design information. All of this results in improved reliability and serviceability of products. The new network will give customers a unified experience across all channels over which they choose to communicate—the Web. for example. connected supply includes all core company functions. for example. collaborate on R&D and engineering. Cisco. and create an aircraft that is much easier to maintain. 3-D models. Nissan. using intelligent devices attached to products at customer sites. improved hospital productivity. A number of leading organizations have embarked on initiatives to deliver connected supply benefits. it expects to reduce development costs by up to 40 percent. and delivery. Fundamentally.

000 engineers work on commercial and integrated • Sensor-intensive supply chain. By improving visibility across the supply network. Dominic Wilson. India. the economies of Brazil.S. organizations. For the 787 aircraft. are in double digits. electrical equipment. ensuring that designs will work together. This landscape has supported rapid growth. Czech Republic. tampering. As they become more and more reliant on contract manufacturers and third-party logistics firms. CEMEX can now reroute trucks dynamically. Russia. 99. Using this interactive R&D environment. are lost because of supply-chain inefficiencies. are increasingly imported from outside traditional industrialized nations. at which it plans to produce 200. Even more important. and Hungary (known as the Visegrád states) in relation to Europe. the sensor-intensive supply chain also changes the way a company sells. The magnitude of this shift is startling. allowing them to react faster and better to challenges. Germany. manufacturers can take advantage of the large-scale market transition we see unfolding. Russia. and other information across the supply chain. shock. manufacturers are finding it increasingly difficult to manage complex. which generates money for investment and increases the affluence of the domestic economy. and United States. Global Economics Paper No. Roopa Purushothaman. The shifting global landscape necessitates next-generation manufacturing By adopting these strategies. Information about products and customers flows more easily.S. along with approximately 25 percent of computers and peripherals and almost 30 percent of general electrical equipment. Boeing already operates its largest foreign engineering center in Moscow. and up to 25 percent of operating costs. and China— collectively known as the BRICs—together could be larger than those of the G6. Malaysia. G6 includes France. CEMEX reduced delivery time from three hours to 20 minutes. enabling more efficient cross-selling and faster reaction to customer preferences. 2003. Neighboring economies include Mexico in relation to the United States. Recent studies suggest that 3 percent to 4 percent of sales. The growth rates for imports from the BRIC economies. the sensorintensive supply chain helps to break down the boundaries between different product silos. and the cars will cost 15 percent less to produce than those made in formerly “low-cost” Korea. driven in particular by low costs in emerging economies such as China and India. India. Goldman Sachs suggests that by 2039. Even goods requiring more sophistication. Mexico. Poland. and Poland. global supply chains. China. Czech Republic.000 cars per year for the European market beginning in late 2006. Using global positioning system (GPS) sensors mounted on cement trucks and linked to a central control center. In our experience. cut the number of delivery trucks by 35 percent. Boeing has committed to accelerating its time-to-market by 25 percent to 30 percent while lowering development costs by more than 20 percent. helping to increase customer satisfaction and loyalty while setting the stage for future sales. which in turn fuels further growth. Census Bureau indicate that imports from low-cost countries** to the United States accounted for more than 20 percent of U.* Data from the 2002 U. The result is a virtuous cycle where investment leads to greater export capability and increases domestic consumption. * ** Dreaming with BRICs: The Path to 2050. Sample consisting of 11 countries: Brazil. such as aerospace parts or medical instruments. car manufacturer Kia is building a plant in northern Slovakia. For instance. and household appliances. and improved on-time delivery. Hungary. For example.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION engineers use a single. companies can quickly provide support centers with more accurate information. GS Global Economics Website. and Thailand. As a result. based on up-to-the-minute information about changing customer requirements. and departments. To counter this problem. and countries that neighbor industrialized regions. leading manufacturers are deploying a variety of sensors to gather location. United Kingdom. which in turn translates into superior returns. Japan. As a result. Indonesia. where 1. Italy. trimmed operating costs by US$100 million. 10 11 . we now see increased competition among emerging markets. CEMEX faced high transportation costs and spoilage as customers repeatedly changed their orders and delivery schedules. Slovakia. temperature. consumption of motor vehicles. Kia will work with 10 of its key suppliers at this new production facility. shared database. this represents more than US$1 billion in savings.

Source: U. surpassed that of the rest of the world.4 8% India 6.S. As customers see an ever-widening selection of goods and * ** *** The Boston Consulting Group China Database. it took one year to double in 2003/4.** In 2005. 2003.9 1% Thailand 1.4 18% Brazil Malaysia Mexico China Indonesia Czech Republic GERMANY German manufacturing imports from emerging markets Key 2002 imports (¤B) CAGR (%) 2002 1997 Total 1997 imports = ¤52B Total 2002 imports = ¤90B 12.1% Russia 0.S. compared to domestic growth.1 -0.S. Statistical Office of Germany. for example. Eastern Europe). 2004. industrial goods imports from emerging markets 86. and manufacturing (see Figure 5). But BRIC growth is driven not only by exports and outsourcing.4 10% Poland 2. cooperating with their peers in the United States. A recent survey of large U. second for energy. Source: International Telecommunication Union. Doubling approximately every two months in 2000.6 14% Hungary 6. high-technology firms are opening substantial R&D facilities in China. Many in so-called developed countries would be surprised to know that the rate of technology adoption inside the BRIC countries has. Source: International Telecommunication Union. is not completely straightforward. 2005. but sourcing. Such segmentation. Many underestimate the scale of domestic consumption. 12 13 . Note: NAICS = North American Industry Classification System. inter-regional (between regions) traffic climbed 64 percent in Asia and 70 percent in Latin America. for example.2 18% 21.-based manufacturing multinationals shows that many plan to start or expand operations in emerging economies over the next three years—not only sales and marketing. R&D.3 15% Mexico 3. * According to Goldman Sachs.2 14% 16.5 3% India 13 8% 14. China. ranks first in the world in market volume for refrigerators and air conditioning. the net exports of BRIC countries have been a relatively minor contributor to their overall growth. GE Healthcare’s new HF Advantage X-ray machine was “designed in India for India” and is regarded as the first in a line of value-for-money products scheduled to be rolled out in other emerging economies. Census Bureau. while intraregional (within region) traffic increased 102 percent in Asia and 336 percent in Latin America. defense system projects.4 5% 3.7 19% 1.*** No global manufacturer can afford to ignore these markets. October 7.8 3% Indonesia Thailand Malaysia Brazil Hungary Russia Poland Czech Republic China Figure 4 Winners of the game: low-cost Asia and neighbor regions (Mexico.S. Some 300 Russian engineers are assigned to Boeing’s next-generation 787 Dreamliner. and fourth for chemicals and packaging. however.5 3% 0. engineering. in many instances.1 14% 1.2 21% 20. Strategy and Policy Newslog.2 1% 2. Most U.3 5% 2. Strategy and Policy Newslog. This latter trend underlines the need for careful market management and close monitoring of local customer requirements. GE Healthcare is finding that buyers in developed economies are also showing interest in using these products as an alternative to more expensive equipment whose advanced features many regard as superfluous. CAGR = Compound Annual Growth Rate. Many manufacturers are developing product segmentation strategies for these markets. it continues to increase in these regions.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION The shifting global import/export landscape UNITED STATES U. October 7. While the growth rate of global crossborder Internet traffic has slowed.1 17% 2. 2005.1 11% Key 2002 imports (US$B) CAGR (%) 2002 1997 Total 1997 imports = US$103B Total 2002 imports = US$186B 59.5 7% 0.

His portfolio of assignments includes strategy and operational work for clients in the energy.S. and a larger variety of channels from which to purchase them.C O N N E C T E D M A N U FA C T U R I N G I N T RODUC T ION Expansion of U. DR. it becomes a buyer’s market.C. In 1982. Instead. the manufacturing sector must defy conventional economic wisdom by increasing customization while reducing prices. and financial services sectors. and responding flexibly to regional needs. Now is the time for companies to embrace the core principles of next-generation manufacturing and use them to achieve a sustainable and competitive advantage. over a decade later. DIRK SCHLESINGER SENIOR DIRECTOR. We see this now in the automotive sector. D I RK S CH LE S I NG ER CHINA MEXICO/CENTRAL EUROPE (WEST. 2004. he was vice president and partner of The Boston Consulting Group (BCG) in Munich and Washington. The pioneers in this book are not simply looking for lower-cost sourcing—they’re creating entirely new models. utilities.S.-based multinational manufacturers into emerging markets Putting the building blocks together In essence. The smooth passage of information across the extended value chain allows them to use new customer approaches in both developed and emerging markets. the Mercedes Car Group produced nine models. and to innovate more rapidly and efficiently.-based manufacturing multinationals with combined revenues of around US$500 billion. and a doctorate from the College for Mathematics and Information Technology at Mannheim University. buyers are increasingly demanding more customized products. They will master increased complexity and achieve the difficult balance between standardizing processes and products internationally.* services at competitive prices. he worked in the engineering departments of Airbus and MTU Aero-Engines. and also features a prayer-time alarm. EAST) AMERICA INDIA Marketing/ Sales 56% 47% 40% 23% Sourcing 57% 26% 14% 21% Manufacturing Engineering/ R&D 38% 25% 10% 12% 26% 9% 10% 14% Figure 5 Survey of 226 U. 14 15 . a master’s degree in business administration from the University of California at Berkeley. Worldwide. McKinsey RACE Automotive & Assembly Extranet Survey. the F7100 does not have a built-in camera. and an additional 23 percent are expected through 2015. it offered just 10. By 2004. No longer content to pay for mass-produced. Dirk Schlesinger brings 14 years of management consulting experience to his role as leader of the Cisco IBSG Global Manufacturing Practice. and connected supply. generic goods. The most successful companies will do this by excelling in all three components of connected manufacturing: customer intimacy. Because photographs carry a cultural stigma in the Islamic world and prayer service is a cornerstone of Muslim religious practices. They will reconfigure global supply chains constantly. companies that embrace these principles are already reaping rewards in terms of improved profitability.** LG Electronics clearly demonstrated its understanding of customer needs with its F7100 Qiblah mobile phone. MANUFACTURING. CISCO Dr. in real-time. Before joining Cisco. 2005. Prior to BCG. innovation. and will avail themselves of the cost advantages and skilled talent pools in emerging economies. it contains an embedded compass device that points to Mecca. which leads to greater manufacturing complexity. We hope these essays will provide inspiration and some insight into how this can be accomplished. and marketed to. industrial goods. Schlesinger has a Diplom-Ingenieur in aeronautical and astronautical engineering from Stuttgart University. INTERNET BUSINESS SOLUTIONS GROUP (IBSG). A German citizen. D. Deloitte Research Global Manufacturing study. As you will read in the essays from this book. the number of car models increased 47 percent from 1990 to 2003. in 1993. however. CENTRAL. showing percentage of respondents planning to start or expand their operations in emerging economies over the next three years. Muslim customers. the number of choices had climbed to 25. which is designed for. * ** Growing the Global Corporation.

T. 16 17 . HIGH-TECH INDUSTRIES LEAD. He has more than 18 years of experience in business and IT management consulting. A United States citizen. Europe. mathematics. and was responsible for e-strategy.C O N N E C T E D M A N U FA C T U R I N G Contributing Editors The following at Cisco Internet Business Solutions Group (IBSG) have also been responsible for the editorial content of Connected Manufacturing : CRAIG HARTMAN DIRECTOR. Kearney. EUROPE. GLOBAL INDUSTRIAL SYSTEMS LEAD. He completed his master’s degree at the University of Utrecht (NL). A Dutch citizen. 1 COMBINING CUSTOMER INTIMACY AND INNOVATION The manufacturing sector must defy conventional economic wisdom by increasing customization while reducing prices. Kuppens studied computer science. and other companies. Before that. he worked for Digital Equipment Corp. high-tech. leading engagements in the financial services. as well as in operational management. Hartman holds a bachelor’s degree in industrial engineering from Purdue University and a master’s degree in business administration from Washington University in St. Nolan. Hartman was a senior principal at A. Kuppens was a partner at KPMG’s strategy consulting group. he was a senior consultant at Accenture. Kearney working in the General Strategy and Strategic Technology practices. and manufacturing industries. CISCO INTERNET BUSINESS SOLUTIONS GROUP (IBSG) Craig Hartman leads the Cisco IBSG Industrial and Diversified Manufacturing Practice. and NCR Corp. Prior to A. Before joining Cisco. he worked with many leading Fortune 500 clients in the manufacturing. Philips. consumer products. and consumer packaged goods industries. as OEM leader. CISCO INTERNET BUSINESS SOLUTIONS GROUP (IBSG) Robbert Kuppens leads the Cisco IBSG High-Tech Industries Practice in Europe. Siemens. and responding flexibly to regional needs. They will master increased complexity and achieve the difficult balance between standardizing processes and products internationally. Norton & Co. Prior to joining Cisco. ROBBERT KUPPENS DIRECTOR. Louis (Olin) with a concentration in strategy. There. and business administration in the Netherlands. working with executives at Nokia.T. and as NCR principal consultant. The most successful companies will do this by excelling in connected manufacturing.

CISCO. Cisco has added a number of advanced technology offerings to its core family of routing products and switching products.000 engineers and dedicates more than US$3. Building an effective customer-support infrastructure is no longer simply about staffing call centers to handle voice traffic—it is about harnessing a wide range of voice. voice. developing communication products used for transporting data.000 people worldwide and reported revenue of US$25. In recent years. and video across private networks as well as the Internet. including the need for high-quality technical support across a diverse set of products and solutions. home networking. TECHNICAL SUPPORT SERVICES.EMPHASIS ON CUSTOMER SATISFACTION is part of our DNA and a critical component of the culture. Introduction THE EVOLUTION OF CISCO’S CUSTOMER-SUPPORT capability over the past decade reflects the sweeping changes that have overtaken the customer-management industry as a whole. These advanced technologies present a number of new demands on Cisco’s business. Cisco employs more than 48. Using technological innovation to deliver world-class customer support CISCO IS THE WORLDWIDE LEADER in networking. and information-sharing technologies to empower both customer-support agents and customers. and wireless technologies—are each expected to constitute $1 billion in market opportunities for Cisco. These products—covering enterprise IP communications.8 billion worldwide for fiscal year 2005. optical networking. The company employs more than 11. UNITED STATES 19 . Pursuing this goal has produced significant business results for Cisco: Joseph Pinto SENIOR VICE PRESIDENT. storage-area networking. security.4 billion annually to research and development. Founded in 1984. and the ability to support customers’ increasingly sophisticated networks quickly and accurately. data management.

in which any customer experiencing a product issue called us directly for technical support. We realized that technology advances could provide us with the ability to scale our support function effectively while offering the high level of service our customers demanded. That belief resulted in an allembracing. supported by metrics to encourage the right employee behaviors. customers communicate using a variety of methods—from e-mail and Web-based forms to fax and telephone. it’s the number one priority for our organization. Our 21 . so did our need to hire highly skilled technicians. If agents cannot find the information in question. combined Web and call-center approach. at a time when the company was growing so fast that we were. availability. quite frankly. Managing these different communications channels places a new level of demand on agents while presenting a number of technical challenges. and as we attempted to scale our business to meet the soaring levels of demand. From our early days as a high-tech start-up. Agents may be asked to find information held in incompatible systems distributed across multiple locations. serviceability. Our efforts to improve customer support began in the early 1990s. and the fact that we have an entire department within Cisco called Customer Advocacy is a testament to that effort. This situation occurred at a time when companies were first experimenting with the use of the Internet to support their key business functions. Sometimes there is a need to use more than one channel simultaneously—a customer searching for an answer on the Web. These pressures on our support system resulted in a drop of more than 20 percent in our overall customer satisfaction scores. unified customer experience provided by skilled agents capable of handling any kind of interaction. there is a strong sense of personal accountability around customer satisfaction. At Cisco. they need to know to whom to refer the query. we realized many of the solutions we had implemented in the technical support department could be applied more broadly across Cisco. unable to meet customer-support needs. We believe this Customer Interaction Network will allow us to realize goals that have long been discussed in the customer-support profession but in practice rarely achieved. closed-loop feedback process that helps the Cisco Development organization make informed decisions about improving the reliability. resolving the inquiry may present additional challenges. as our business grew rapidly. In effect. Over time. and we have had to tackle a range of technical and organizational challenges. Few organizations have succeeded in developing the necessary infrastructure. I like to refer to customer success as the “high-order bit”—in other words. We have had a formal system of measuring customer satisfaction for more than 10 years. Cisco was growing at such a rapid pace that scaling customer support to meet our expanding customer base became a management imperative. This is precisely what we have been building at Cisco over the past 10 years in an effort to make sure we provide a support capability that satisfies our customers. depending on the nature of a customer call. At the time. may want to talk to an agent at the same time—and to employ new kinds of collaborative tools. flexible information infrastructure. the leadership at Cisco devoted time and energy to our customer focus. who were very scarce at the time. The early years: Internet technology drives a vision of quality Web-based customer support In the early 1990s. 20 Second. Consequently. which presents significant access and integration issues. and usability of Cisco products • Standardized 24-hour global customer-support capabilities • Ten years of increasing customer satisfaction ratings These advances have not always been easy. and each employee who has direct contact with the customer or not is compensated in part on the basis of customer satisfaction. for example. we were operating a fairly typical high-tech customer-support operation. which uses Internet-based technologies to deliver a consistent. Any organization with a sizable customer base knows that handling customer inquiries is an extraordinarily complicated business.C O N N E C T E D M A N U FA C T U R I N G U S I N G T E C H N O L O G I C A L I N N OVAT I O N • Consistent. This emphasis on customer satisfaction is part of our DNA and a critical component of the culture. As a result. For starters. we obviously had something of an inside track. We initially addressed the problems using our own IP-based technologies—moves that put us at the forefront of contact-center thinking. it quickly became clear that we simply could not continue along the same path. repeatable. they require a transparent organizational structure and a very open.

We are unique in that we have a team of more than 50 people dedicated to ensuring that we provide the most upto-date and accurate support information on Cisco. Provide tools for self-service 4. a preference that was repeatedly confirmed by our customer satisfaction Clear customer-service vision Customer Interaction Timeliness of Response Automated Human Agent measurement systems. Connect to the most appropriate human agent 5. After all. it makes no sense to reward support staff based on the number of calls they handle—a common call-center metric—if our 3. but they are also available around the clock. Their technical savvy meant that most of our customers preferred to use the Web as their primary means of customer support. and we invested the resources to capture. Actively drive customers to self-service environment (Web) Figure 1 Cisco. we implemented a series of initiatives to provide a high degree of self-service while still offering rapid and easy access to engineers with the requisite skill sets. In addition to improving satisfaction. This willingness to share product defects with customers in an open and forthright way also differentiated us from our competitors. and this drove much of our own internal experimentation. Today. 2002. Empower employees through focus on complex issues and new agent career path Delayed 1. Our successes have been significant. we realized that technology advances could provide us with the ability to scale our support function effectively while offering the high level of service our customers demanded. for example. Not 22 23 . For example. we have learned a lot along the way. Today. which increases customer self-sufficiency and productivity. backed by a high-quality engineering staff motivated around customer success. We started with what today would be viewed as a very rudimentary capability: a bulletin board providing customers with selfservice access to a published list of updates of software bugs identified in our products. we educated them on how to access Web-based help. As our capabilities grew. Enable customers to reach a human agent Real time 2. First. Not only are the Web-based solutions quick. When customers bought our products. we built a capability for our customers to open tech-support cases online and allowed those customers to speak with engineers more quickly than customers who simply picked up the phone to call. We also took advantage of the capabilities of our own technology infrastructure. 79 percent of support cases are resolved directly by customers using the content and tools we offer via the Web. we have benefited internally: the technical support department has made process changes that have created savings based on these self-service strategies. Any concerns that customers would be unhappy being asked to troubleshoot their own problems online have proved to be unfounded—our Web-based self-service has actually had a positive influence on customer satisfaction. which has been steadily increasing since the early 1990s. From these humble beginnings on the Internet.C O N N E C T E D M A N U FA C T U R I N G U S I N G T E C H N O L O G I C A L I N N OVAT I O N people understood the burgeoning Internet technologies better than anyone else in the industry. document. This capability reinforced the behaviors that we were trying to encourage—outstanding customer support through the use of a rich set of tools and content available via our Website. We also recognized that we were fortunate to have a customer base that was skilled in the newly developing areas of Internet technology. we quickly realized that our customer-support metrics and incentive systems needed to be realigned in order to realize benefits from our strategy. and share solutions for the most common technical problems on our Cisco Website. 79 percent of support cases are resolved directly by customers using the content and tools we offer via the Web.

composed of senior executives from across Cisco. Cisco had also standardized its whole IT data infrastructure. where managing attrition is a key management challenge. Unlike agents in traditional call-center environments. our agents are building baseline skills in a number of aspects of our business and have multiple career path options within the organization. By 1997. This forum ultimately recognized that the customer-support innovations developed by the technical support department could be applied much more broadly to the rest of the Cisco organization. Many IT tools were developed by independent teams. we were one of the first companies in the world to adopt a full IP-based call-handling infrastructure—a business transformation capability that we are now able to fully exploit as part of how we interact with our customers. when the company first decided to implement a single Oracle enterprise resource planning (ERP) system for the whole organization. The Customer Interaction Network: Transforming the customer experience As a first step to re-creating our successes in postsales technical support. innovations. by using the Web and the phone together to guide the customer to a solution. These investments provided a strong foundation for us to build out our Internet capabilities across the organization. a Cisco agent is expected to help coach customers about how to solve their problems using all the Cisco resources available to them. we had no structured method to fund and track central initiatives. Second. it also created IT-management issues. Because of this. we started to appreciate that the role and skill sets of the frontline agent had evolved well beyond simply answering the telephone. Not surprisingly. They realized that the company could capitalize on this customer-support progress by applying the approach to the rest of Cisco. the network was 100 percent TCP/IP. Prior to implementing the Customer Interaction Network. We established the Business Process Operating Council (BPOC). including our customer-support contact centers. it was piecemeal and inconsistent. 25 . and successes of the technical support department caught the attention of leaders across Cisco. they often duplicated their efforts and were often unable to share information and resources. In short. In 2003. isolated call centers • Inconsistent service levels • No usage of standard tools • “Haves” and “have nots” in Web tools • Multiple negotiations with single vendor • Lost sales opportunities • Customer experience = many transfers • Maintanance and changes ineffective Figure 2 Cisco. Thus. we examined what our customers actually experienced when they contacted us. While Cisco’s explosive growth allowed for a great deal of innovation. customers worldwide had to choose from more than 500 telephone numbers in order to contact Cisco. In early 2002. we realized that we needed to focus on executing cross-functional programs. like that of many other large organizations. has evolved over time. 24 Business problem: Cisco perspective (April 2004) Multiple Front Doors • 62 internal and external call centers • 42 unique business functions • 23 unique vendors • 539 dialed numbers into Cisco Inconsistent Customer Experience • Many small.C O N N E C T E D M A N U FA C T U R I N G U S I N G T E C H N O L O G I C A L I N N OVAT I O N goal is to maximize the use of customer self-service. using our own technology. Cisco’s approach to customer contact. 2006. we completed the migration of all Cisco voice communications to the same IP infrastructure. This is very different from the traditional contact-center environment. the concept of the Customer Interaction Network initiative was born. to sponsor and coordinate these major initiatives across the company. and because it was driven by the various departments responsible for working with customers. As a consequence. for example. and while they all tapped into the standard ERP system. Moving beyond technical support The lessons. IT standardization has been a Cisco trademark since the mid-1990s.

if possible • Hands off calls if issue requires a deeper level of knowledge • Runs using Cisco Unified Contact Center and knowledge management tool (ISAAC) CUSTOMER Web Self-Service Customer Interaction Network Frontline: ISAAC Commercial Cisco Reception Customer Service TAC Contact Center (In/Out) Corporate Operator GPS Asset Recovery Packaged Services SE Help Desk Figure 6 ISAAC = Information System for Accelerated Access to Cisco. quickly and easily. we can invoke Web collaboration technologies and phone collaboration technologies to help resolve customer questions quickly and easily. TAC = Technical Assistance Center. we are now in full-scale rollout of the capability across the globe. But how could we build a frontline department that did not simply transfer every call it received to another part of the business? And furthermore. because customers told us that automated response systems were a source of significant frustration. Our goal. The next step was for the team to document the most important customer-facing processes across the organization. our agents can show customers how they can find answers to their questions online—a practice customers can employ on their own the next time they experience a similar issue. If the process needs to change for some reason. we can do it once within ISAAC. regardless of the reason customers were contacting us. After a pilot implementation of the Customer Interaction Network. how could we get all the different business functions within Cisco to appreciate the need to work together to drive overall customer-support success? This is where the Customer Interaction Network team turned again to the BPOC to get the initiative off the ground. as well as ongoing learning for the agents as they continuously use and incorporate new information. In addition. therefore. We also wanted to move away from using a machine to answer a customer call. we can refer any conversation to literally anywhere within the organization without losing information the customer has provided. SE = Systems Engineer. this lack of consistency was adding unnecessary costs to our business. 2006. at the push of a button. where that wasn’t O N N E C T E D M A N U FA C T U R I N G U S I N G T E C H N O L O G I C A L I N N OVAT I O N In addition to frustrating our Website as part of the customer experience. Using this methodology. which all frontline agents could access. We estimate that our frontline Customer Interaction Network team will handle in excess of 1. The team built these processes and solutions into an internal knowledgemanagement system called Information System for Accelerated Access to Cisco (ISAAC). The ISAAC capability also provides accurate. We set about developing a plan to tackle this problem and concluded that we needed a single. We were not realizing economies of scale with our partners. This is just one example of how the power and flexibility of the IP network really come into play. we also captured the appropriate methods to use in answering customer inquiries via the resources available on Cisco. Cisco. 26 27 . responsive frontline capability. to refer the customer accurately to the right resource within Cisco. to offer a high level of first-call resolution— and. In addition. real-time information for agents to share with the customer. Likewise. we were not maximizing our substantial investments in the Cisco. While we were documenting the customer experience. who were often the prime contact points for customers. was to have all calls answered by a knowledgeable agent who could accurately answer the inquiry on the spot—in practical terms. and all frontline agents adopt the new process immediately as it populates the system. focusing on how to answer the customer question rather than on what the actual answer might be.5 million customer calls worldwide this Cisco is deploying a common frontline organization • Common frontline organization • Handles in-bound customer calls to contact centers and corporate operators • Treats calls and resolves issues. A key component of this approach involves codifying all the major customer-facing processes across Cisco.

24-hour customer experience. July 2006).C O N N E C T E D M A N U FA C T U R I N G U S I N G T E C H N O L O G I C A L I N N OVAT I O N fiscal year. education. workforce optimization. and a wealth of Web-based technical support tools and documents on the Cisco Technical Support Website. play. From an employee-management perspective. further supporting the critical relationship between universities and the high-tech industry. Our initial implementation experience has already exceeded expectations. Pinto is active in philanthropic work. While enhancing the customer experience is the primary objective of the initiative. our mission centers on using technological innovation to transform the way we work. and is chair of the Engineering Industry Advisory Council at San Jose State University. JOE PINTO SENIOR VICE PRESIDENT. California. Interlog.000 employees around the globe provide Cisco customers and partners with a full range of world-class support services. Cisco has also partnered with Wichita State 28 29 . Under Pinto’s direction. He has delivered the keynote address at Help Desk Institute. and customer feedback in both Europe and in the United States has been very positive. May 2005). TECHNICAL SUPPORT SERVICES. UNITED STATES Joe Pinto is senior vice president of technical support services at Cisco. live. and Service & Support Professionals Association events. Pinto’s 2. informed resolutions to questions customers ask using whichever channel they prefer. We believe that the Customer Interaction Network demonstrates how powerful that transformation can be. This has allowed Cisco to realize significant financial savings and time efficiencies by using the Web for customer care. providing fast. CCIE certification. we have taken steps to address the industrywide problem of high turnover in contact centers by transforming the role of our service agents. the worldwide leader of networking for the Internet. and learn. including expert technical assistance over the telephone. supply-chain management. we offer a consistent. on-site and spare-part logistics. As a result. we standardized our support processes and methodologies to take advantage of economies of scale and to replicate best practices around the world. Pinto joined Cisco in February 1991 and has successfully evolved the traditionally phone-based technical services function by developing an industry-leading Web-based support component. an additional benefit is that we expect to save US$30 million in operating costs over the next four to five years as a result of this capability. He has also established the Pinto Family Foundation to assist northern California health. 79 percent of all Cisco customer technical support issues are solved online. creating highly skilled roles with meaningful career development. and e-learning. serving on the board of the Cisco Foundation. and Maximizing Customer Value Through Support Information (CRM magazine. And most important. built on a foundation of a reward system that reinforces our customer satisfaction priorities. CISCO. In addition to the financial and productivity savings from optimizing our communication channels. and welfare groups. University to develop an on-campus Cisco Technical Center. Pinto holds a bachelor’s degree in business from Golden Gate University in San Francisco. The innovations we have pioneered in providing customer support have already generated significant business results. At Cisco. Pinto shares his knowledge of service and support strategies via industry conferences and industry articles including In Search of a New Value for the Support Operations (Financial Times.

and in 2004. Visibility provides a clear. and the parts both will play in the future. efficiency. and research and development globally.FUTURE SUCCESS will require the ability to meet customers’ increasing demands for greater speed.000 employees around the world. Our approach to IT has been shaped by a strategic shift in our business over recent years. competitive advantage in the global marketplace and delivers a positive impact on revenue growth. commercial. and consumer markets. our company achieved a second-place ranking in Information Week magazine’s annual list of the 500 best users of information technology. and accountability.6 billion. James G. industrial automation. We are using IT to develop more efficient ways to connect with suppliers. WE PRIDE OURSELVES ON OUR INNOVATIONS in information technology. safe. and partners globally. Berges PRESIDENT. The business combines technology and engineering to provide innovative solutions for customers across a wide range of industrial. Emerson’s solutions include sophisticated process-control systems that help ensure efficient. and to meet the needs of customers more effectively by delivering greater visibility. and computer networks from electric power outages and disruptions. employees. electronics. We are also using IT to improve our ability to manage growth. productivity. and telecommunications. Driving business innovation with enabling technologies EMERSON IS A GLOBAL MANUFACTURER of technology products that address process management. EMERSON ELECTRIC CO. It has more than 100. In addition. phone. Emerson’s reliable power technologies help safeguard the Internet. UNITED STATES Technology’s changing role in our business To understand the roles innovation and technology now play at Emerson. the company’s worldwide sales totaled US$15. Recently. it is important to 31 .. and high-quality production of everything from petroleum and chemicals to food products and pharmaceuticals.

we began to invest heavily in R&D to move up the food chain.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G B U S I N E S S I N N OVAT I O N W I T H E N A B L I N G T E C H N O L O G I E S understand how our business has evolved. 32 33 . They used less water. TOTAL PERFORMANCE 5. The strategy developed back in the 1950s was to compete by having “better cost labor. Instead of being just a component supplier.5 million units sold MODEL 3095 • MultivariableTM DP. They started to see the emergence in the United States of front-loading. so as a result. and worked hard to keep them union-free so that we wouldn’t end up with restrictive work rules and customer-service risks.” So. 2004. then at very high speeds to wring out the water. thermostats. flow elements • Over 1. By 1990.. used with permission.AND 10-YEAR STABILITY Figure 1 Illustration of Systems View. and power supplies—we started to see low-cost competition coming from Asia and Latin America. common in European-style washing machines. 2004. by which the machine operates at high speeds to wring out more water from the clothes before the drying cycle begins. Emerson grew by being best in cost. Moving from motor. we produced 30. we were starting to run up against limits. a process. further device penetration would be limited. despite being a US$9 billion global company. Arkansas. In our core components market—motors. Emerson Electric Co. and others that had unionized facilities in Ohio and Indiana. Emerson Electric Co. we built factories in Paragould. In the years following. Maytag. Kennett. We reacted to these new threats by building plants in Mexico and Asia to take advantage of lower costs and to serve those faster-growing marketplaces.000 washing machine motors a day for Whirlpool. Missouri. Westinghouse Electric Company. at our Paragould plant. We moved Evolution of intelligent field devices MODEL 1151 • Rugged capacitance sensors and transmitter packaging • Modular construction • Dual compartment housings • Over 5 million units sold MODEL 3051 • CoplanarTM design platform • “Free-floating” sensor • ASIC surface mount technology • Integral manifolds. Missouri.and transmission-driven top-loading washing machines to a front-loading machine is not a trivial exercise. We now provide not only the motor but also a system that enables the motor to operate over a wide range of speeds. COPLANAR CAPACITANCE SENSORS MULTIVARIABLE DP FLOWMETERS SMART LOW POWER TRULY SCALABLE ARCHITECTURE XMTR-BASED CONTROL ADVANCED DIAGNOSTICS DP MASSFLOW 12-YEAR WARANTY DUAL COMPARTMENT MODULAR PACKAGING INTEGRAL MANIFOLDS Without an industry-leading control system. used with permission. so these customers came to us for a total drive solution. But our customers’ needs began to change. & T • Dynamically compensated mass flow • Full AGA and ISO flow calculations 3051S SERIES • Scalable platform • New measurement practices • 2X Performance • 2X Reliability 1969 1980 1990 2003 INDUSTRY FIRSTS Although devices were purchased individually… Many devices were purchased as part of control systems with proprietary communication protocols. Fifty years ago.. For example. this investment allowed us to link these best-cost components together into The need to break the system influence a set of solutions for our customers. and Ava. D. Our competitors were General Electric Company. You want to operate at low speeds while washing. Meanwhile. they were very energy efficient. and Electrolux. Emerson was primarily a domestic electric motor company with a union-avoidance strategy. pressure transmitters. Figure 2 Illustration of how products are evolving to become more intelligent. We became less dependent on the components themselves and more focused on adding value.

our DC power systems business provides 48-volt systems for telephone companies’ central offices and wireless base stations. a record unequaled in United States industry. we have come to recognize it can be better to have somebody else make some of these parts for us. but every country and many service providers have their own standards. or compressors we couldn’t make better than everyone else. At these locations. Our biggest use of IT. used with permission. and we created global teams to agree on common specifications. in 2000. an increasingly important area for our business. Emerson Electric Co. our service people carry laptops while on the road to manage their personal schedules. We used to make everything because we were the “best cost people”—we didn’t think there was a single part of our motors. is on the design side of our business due to the global spread of our operations and designers. The fundamental challenge Emerson now faces is keeping our costs low while still remaining competitive in all products and solutions we sell. came the collapse of the Internet bubble. Emerson began outsourcing a growing proportion of non-customerfacing activities. 34 35 . and China. which allowed us to focus on our core strengths. Slovakia. The end result is a hybrid model. Webcasts allow everybody—whether they are in China. In many of our businesses. we designed a whole new generation of products with a global design team. Market adapted DC power systems based on standard units GLOBAL BUILDING BLOCKS Unit design and production • Rectifiers Europe North America China Middle East • DC/DC conv • Distributions • Controllers • Subracks REGIONAL CONFIGURATION CENTERS South America Assembling regional designed systems • Batteries • Inverters • Distributions • Cabling • Cabinets Africa Asia India IT as a business enabler Emerson uses IT in a number of key ways within the business. This made it impossible to sustain our 44-year history of continuous growth in earnings per share. and to order spare parts. Web conferences ensure that every member of our design teams—regardless of location—can stay current with a project. in order to find new and better ways of sharing information. We have a rigorous development process that requires conference calls at least weekly. thermostats. and develop a local version of a product. we strive to have the best-cost factories at the component level. A number of our Emerson Retail Services employees use wireless mobile devices to call up design specs and diagnostic routines. Then. On a day-to-day basis. or Canada—to be online and view pictures of products simultaneously.. which can be anywhere in the world. eliminating the need to carry heavy manuals when out on a job. local design teams put the building blocks into systems that meet local customer requirements. On one hand. are consumed worldwide.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G B U S I N E S S I N N OVAT I O N W I T H E N A B L I N G T E C H N O L O G I E S from selling our customers a US$25 motor to selling US$80 worth of motor and controls. and expertise on a global rather than local basis. On the other hand. We manufacture the building blocks in China and ship them to configuration centers in Mexico. The DC power example is a good illustration of how important IT is in coordinating our strategies. we literally design products around the clock. 2004. Now. South Africa. Then. as our business has matured. The biggest place we are using IT is on the design side because the team comprises people from all over the world. We also use IT to encourage collaboration. handing off the design to the next time zone every evening. We found that there are some common elements. These products Figure 3 Illustration of Emerson’s global footprint (DC Power). access technical support for maintenance. Sweden. however. provide his or her unique inputs. This has meant greater collaboration—both internally and with external partners. For example. South Africa. India. technical knowledge. we continually focus on serving customers with solutions that are specific to local markets.

We started to do some engineering collaboration. It has been hugely cost-effective because we now have four times the volume in a single design. The first product on which we worked together was a nextgeneration 50-amp rectifier.” We also have vaulting for the drawings since we are effectively designing around the clock. “Telefonica insists upon it. we made a number of acquisitions. Philippines. and other unique customer requirements. Bridging the cultural divide It wasn’t hard to get agreement from everyone to work this way. manual task. frequencies. “We’ve got our first-generation samples done. but we were not getting much traction because everybody was busy trying to keep up with a 30-percent growth rate. Some people thought we were crazy at the time. seven-days-a-week call center in Manila. where they were seeing price pressures that required rapid redesign responses. The global team was ready for the help. and we left them both alone because they were doing great. For example. We bought Nortel’s and Ericsson’s power businesses. When business was growing from 1998 to 2000. so we’ve got to do it. The biggest impediment to changing this situation was that we had 110 data centers running 63 different enterprise resource planning (ERP) systems. when business started to fall. they had a product they loved. and where it was purchased. Another example of IT’s use within our business is procurement. to handle queries from oil and gas industry maintenance engineers working in the field. IT’s role in other functions Aside from design.” All China saw in the global designs was the likelihood that they would slow down their ability to innovate in their own market. We told them they could not go off and do it themselves. The biggest place we’re using IT is on the design side because the team comprises people from all over the world.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G B U S I N E S S I N N OVAT I O N W I T H E N A B L I N G T E C H N O L O G I E S Each team member wants to stay informed. Yet. And the feature set of the 50-amp rectifier is very rich because know-how from Sweden and from Canada was built into the product development process. Access to an FAQ database and technical specifications used by this team occur via broadband. Everyone needs to be connected. so that he or she can develop a local version of the product and provide inputs about required voltages. As drawings are updated and changed by the design team in China. they had to wait while designers and marketing people from around the world agreed on a global specification. 36 37 . so if someone says. We were getting zero leverage. such as pricing reviews and value mapping. positive impact on the bottom line. broadband technologies have played an important role in supporting the day-to-day activities of our customers worldwide. We have hired people with process-control experience who are fluent in many languages and capable of running diagnostics to help callers with their problems. We paid US$750 million for a Chinese company with US$160 million in sales. we were an organization of 60 or so independent divisions. but we were unable to reach that temperature-rise requirement that the experts from Brazil wanted. We revised their design process by adding some marketing gates. Just figuring out how much of a particular commodity we purchased was an enormous. That is how we established the parallel design strategy and our ability to get rapid redesigns. This has significantly improved the performance of these units. The biggest challenge was getting the China team lined up to assist the rest of the world. and they’re a US$50 million customer. we opportunistically bought into China when we acquired Huawei’s power systems business. but the China-based operation was fixated on the Chinese market. How important is that?” the guys from Brazil can say. Historically. Our business dropped by 40 percent between the first quarter of 2000 and the first quarter of 2001. but we established a foothold in the fast-growing Chinese market and gained access to more than 500 China-based power engineers. The telecom and data center businesses collapsed. they are ready for review by team members in other parts of the world when they arrive at the office the next morning. “We need your help to take some of your resources and put them on global design projects. It was a real challenge for the management team to say. A year later. each making its own decisions about what it bought. we have extended our service and solution proposition by setting up a 24-hour. where we are seeing a direct. So we were obliged to change the way we did business.

We manage Telefonica’s power. Emerson: lessons on innovation • Develop a deep understanding of customers’ needs. Already. We have little doubt IT will help us increase productivity in the future. The end game is to reduce the number of suppliers we use. or to design petroleum plant and power-generation facilities. for example. Tomorrow. from utility to chip. We are now working to add descriptive fields so we can break down die-casting data by type of alloy. It encompasses 63 ERP systems and interrogates them periodically to retrieve price and volume data from item records. We have teams of people working within Telefonica’s operations units. attending morning meetings where they talk about network problems. when they decided to upgrade or build a new refinery. we can call up parts by manufacturer part number and examine price differentials being paid across different locations. not only how many die castings we are using. they turned to construction engineering houses. but then they realized that these suppliers just couldn’t handle the control-system side. although it is currently a bit too expensive. we roll out teams to find the problem and fix it. we have a single. This allows us to buy components at the best price within the global market. Already. They went to the marketplace and asked for help in designing processes. overarching data warehouse called the Material Information Network. Our Corporate Technology Group is closely following the evolution of wireless monitoring. whether to design wireless telephone sites. efficiency. We now perform this front-end design work. and we have already been able to realize cost savings of between 5 percent to 10 percent. allowing millions of dollars of savings. we believe our customers will place growing value on systems and total packaged solutions. and we are responding more effectively and efficiently to our customers’ demands. This power is used in all of Telefonica’s central offices and cell sites. but now we can find. we are working to build more and more visibility into our processes. In the future. but also at what price and from which vendor. immediately available via a Wi-Fi receiver. Once we were just a measurement instrument business. now we are also a solution and service provider. We foresee significant potential for radio frequency identification (RFID). As they do. it would be ideal if the data were just there. our ability to engineer quickly with a “swarm engineering” effort—getting an order into the system. reinvest preemptively • Use best-cost resources to speed the pace of innovation 39 38 . By improving inventory turnover over the past five years. and by mold size. What the future holds We also see potential for IT in other areas of our business. Today. at the press of a button. We are their power representatives. Instead of wandering around a warehouse to get data. if there is an outage at a site. and accountability. Future success will require the ability to meet customers’ increasing demands for greater speed. We are exploring other areas as well. the oil companies had to restructure. petroleum engineers. We have freed up considerable space within our factories. Consider the oil industry. where active tags on badges help prevent unauthorized employees from entering a sensitive area. customers will come to us for original design work. Equally important will be our ability to connect end-to-end order entry and fulfillment in ways we have never done before. In Peru. they will start asking for operational and maintenance contracts. As a result. Initially. and address them with innovative solutions • Use innovation to change threats into opportunities • If you believe. and process people. we have invested approximately US$25 million in this system. onto the plant floor. including breaking crude oil into new categories such as jet fuel and diesel. A classic place you might use this is a factory. and into the customer’s hands on time—will be a key competitive weapon. When oil was US$11 a barrel. It took a couple of years to get this rolled out. and. Increasingly. we are getting significant productivity savings from our lean factories. So far. This has already happened in the telephone business. they no longer had the people who could do it in-house. across most of South America. The richness of data available in an RFID tag also makes it a great productivity tool. we buy power on Telefonica’s behalf from multiple companies. This pattern seen in the oil industry will be replicated elsewhere as well. we have significantly improved our working capital ratios. eliminating thousands of control engineers. So the oil companies got smart. We have little doubt that IT will help us increase productivity in the future.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G B U S I N E S S I N N OVAT I O N W I T H E N A B L I N G T E C H N O L O G I E S Today.

as vice chairman of the National Association of Manufacturers. he was named vice chairman and was elected to the board of directors. UNITED STATES On graduating from the University of Notre Dame in 1969 with a bachelor’s degree in electrical engineering. He joined Emerson Electric in 1976 and returned to the corporate offices in 1989 as group vice president of electronics and. He was elected to the board of directors of PPG Industries in 2000.” charged with revitalizing and formalizing Emerson’s five-year profit planning process.S. James (Jim) G. EMERSON ELECTRIC CO. and is a Trustee of St. He serves as chairman of the board of commissioners for the St. Berges took a special assignment as Emerson’s “Profit Czar. Louis Children’s Hospital. He is a member of the Business Advisory Council at the University of Notre Dame College of Business. He was recently appointed to the Guangdong Governor’s Economic Advisory Council. subsequently. In 1999. Since writing this essay. and as a director of the U.. Berges has retired from the company. In 1997. He also received a presidential appointment to the Advisory Committee for Trade Policy and Negotiations in 2005. as executive vice president responsible for the Industrial Components and Equipment business. In 1992. and to the board of MKS Instruments in 2002. Berges entered General Electric Company’s manufacturing management program. 40 41 . Berges was appointed president. Louis Science Center. Chamber of Commerce. BERGES PRESIDENT.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G B U S I N E S S I N N OVAT I O N W I T H E N A B L I N G T E C H N O L O G I E S JAMES G.

Bernie Anger GENERAL MANAGER. and water processing. and knowledge-based services. GE Energy operates in what can only be described as a tough market. It is our ability to manage information to help customers optimize their investments. and services—it is uniquely prepared to help fulfill demand for reliable. tend to talk in 43 . utilization. and as the market has matured. products. GE is committed to remaining the industry’s premier provider of gas turbine and combined-cycle power generation technology. rail. Power generators. emissions control. GE ENERGY. and services to the energy industry. That growth stems from several new areas of emphasis and technology development including plant optimization (monitoring and controls). OPTIMIZATION AND CONTROL. energy. OPTIMIZATION AND CONTROL. GE ENERGY.IT IS NOT JUST LEADING-EDGE TECHNOLOGY that sets our equipment apart. MARKETING AND COMMERCIAL OPERATIONS. for example. oil and gas. one of the world’s leading providers of fundamental technologies to developed and developing countries. margins have come under increasing pressure. aeroderivative gas turbine technology. and network reliability. As one of the world’s leading suppliers of technology. UNITED STATES Because the company provides a comprehensive range of solutions across the energy value chain—from supply and conversion to delivery. TECHNOLOGY. cleaner. The Infrastructure portfolio includes technologies and services for aircraft engines. GE Energy had 2005 revenues approaching US$17 billion. John Cataldo GENERAL MANAGER. UNITED STATES Business Environment EVEN BY THE HIGHLY COMPETITIVE STANDARDS of the manufacturing sector. Services account for approximately 60 percent of GE Energy’s revenues and are growing at an average annual rate of 14 percent. Considerable consolidation of the customers it serves has taken place since the late 1990s. and more efficient energy. Through a continued emphasis on research and technical innovation. Driving innovation to power the world GE Energy Profile GE ENERGY IS PART OF GE INFRASTRUCTURE.

Investing in technology helps us meet those contractual obligations at multiple levels. the emphasis is on finding more capacity in the existing base of installed assets. the better you are able to create fuel efficiency. It is a precision skill. The equipment is supported by our remote diagnostic capability and collaborative technologies that connect customers to our experts. In a sector where a quarter of a percent of heat rate can significantly impact a generator’s bottom line. and so forth. we collate all of the operational data from assets such as turbines. Today. Two key factors enable us to accomplish this: customer intimacy and innovation. From a worldwide perspective. These technologies are leading edge. are significant assets. These requirements are not limited to the initial productsourcing stage. GE continues to invest heavily in primary technologies. Just as important. by itself. and particularly in China. and generators. while another may focus on energy output. compressors. The nearer you are to achieving peak performance. This allows refinement of ongoing maintenance techniques and the ability to feed data back into the manufacturing cycle. We also deploy computer control systems that allow us to run our equipment as close as possible to its physical limits. the Canadian market is growing also. We can help customers diagnose equipment problems on a special basis or provide continuous remote monitoring. has reduced the overall global market. Balancing these competing demands for cost control and continual improvement in product quality is fundamental to meeting corporate objectives. we help customers replicate best practices that may have developed on another side of the world. Not only do sufficient quality controls need to be in place during the component sourcing and manufacturing stages. gain tighter control over emissions. for example. We recognize that customers have different priorities. Thus. It is equally important that information flows freely between GE and our suppliers throughout the lifecycle of each product. First. We then pass this analytical information back to our customers. where the performance of a customer’s power plant(s) is guaranteed through service-level agreements. we need to understand how different assets perform within an industry and under different operating conditions. Gas turbines. has been suffering from significant overcapacity of turbines during the last few years. enabling continued product improvement. driving hard over the last five to six years to find suitable partners in eastern Europe. one customer may have an emissions-driven strategy. 44 . such as materials and thermodynamics. as well as in simulation and modeling capabilities. however. Demand varies significantly depending on where customers are in their business development cycle. from a design perspective. this overcapacity has put downward pressure on prices. these contracts constitute a portfolio of close to US$30 billion in contractual commitments. pennies and nickels really do make the difference. there has been a significant build-up of gas turbine equipment since about 2001. Similarly. 45 GE Energy operates in what can only be described as a tough market. where the focus is on securing a series of sales. In North America. forcing suppliers—including GE Energy—to reappraise their cost structures continually. where sales are seen in the context of an ongoing contractual relationship. comprehensive documentation and tracking systems are also needed to guarantee the authenticity of parts. The company has responded by looking to emerging markets for product supply. In fact. This information is aggregated and analyzed using proprietary algorithms to improve our understanding of optimal equipment performance. For instance. to be able to burn fuel at the highest possible temperature without damaging the machine’s components. and this. the sector is subject to global shifts in demand. Customer intimacy As with other manufacturing sectors. the energy industry has recently moved from a transactional perspective. of course. a high percentage of GE’s customers for power-generation machinery are on contractual service agreements. to a contractual one.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G I N N OVAT I O N T O P OW E R T H E WO R L D terms of delivering their customers a nickel more every day. By doing so. Inevitably. while the next it may shift from capacity growth to maximizing efficiencies with existing equipment. at a macro level. and their complexity means that GE has had to develop a new infrastructure to work effectively with these offshore partners. Today. In the United States. demand for gas turbines is growing in most of Asia and in parts of Europe. The cynical nature of the business is one fundamental challenge we face. The United States. One year the priority may be to secure additional power-generation capacity.

while our contractual commitments provide some revenue stability. so knowing in advance that an asset needs to be shut down can prevent expensive repairs down the road. Harnessing innovation Besides customer intimacy. with engineers in China. We also conduct tailored analyses to predict potential problems. as well as in sophisticated communications infrastructure.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G I N N OVAT I O N T O P OW E R T H E WO R L D GE Energy’s optimization and control business value proposition is based on this unique domain knowledge—a deep understanding of the operating characteristics of each asset. if you anticipate and plan for downtime. 46 47 . not only are we guaranteeing performance against predefined goals. Whether they are making initial purchases or upgrading existing equipment. For example. In some parts of the world. This depth of understanding can result in savings of millions of dollars. Innovation is not restricted to a particular function. we also rely heavily on innovation to fuel profitable growth. the more we can hone in on those small but significant changes that contribute to sustained increases in customer profitability. Because of this. the applications that run on them. such as petrochemical refineries. Hungary. our GE Energy business has a widely distributed workforce. Unlike many other organizations. particularly in emerging markets. expected to contribute to meeting growth targets. The more we accumulate performance information and analyze it. and elsewhere around the world. If we accurately predict when a critical piece of equipment will need to be serviced. We are constantly seeking ways to differentiate ourselves further to fuel margin growth. we tier our technology investments. leading to lost production and large overtime payments. it also involves refining our methodologies and replicating best practices. customers recognize the value that these services provide. and then assess the potential impact on a customer’s business. It is not only about creating and sourcing new products and add-ons. By contrast. a repair can cost many millions of dollars. such as new material inventions. We work closely with our customers to build and share this expertise. however. We also have a groupwide research center that focuses on extremely long-term projects. you can deploy alternative assets to provide coverage. So. India. it is not enough for us simply to ride on the backs of those agreements. As part of these contractual service agreements. and its business leaders—from sales and marketing to technology—are • Heat rate (which equates to efficiency) • Output • Emissions • Reliability or availability We meet these needs through a novel approach to research and development (R&D) that takes advantage of the resources available across GE. driven by business objectives. and healthcare operations. looking at asset histories and the frequency and criticality of particular failure modes. have a significant financial impact. it also can be used by our energy. our customers look to us for product leadership in one or more of four key areas: We are constantly seeking ways to differentiate ourselves further to fuel margin growth. home security. Unplanned stoppages in downstream activities. Innovation manifests itself in many different ways. customers are reluctant to pay for services. trading knowledge across the industry with operating and maintenance managers. GE has a reputation for focusing on quarter-to-quarter growth. and we can charge for them as long as we demonstrate we are supplying unique domain knowledge and expertise. we can avoid surprise failures. As a result. or schedule outages for slower periods. the economic benefit of performance increases we provide to customers also are shared with GE. we are constantly looking to improve the profitability of all of our assets to benefit our customers. and the impact each has on the other. if GE invents a new material. In the United States and western Europe. We have invested heavily in collaborative development techniques and tools. our core groundbreaking technologies can be applied across multiple lines of business. The same is true for preventive maintenance in power generation. For example. Typically. rather. Our lines of business work on their specific development needs. it must permeate the organization. to allow these dispersed groups to work together virtually.

technology. and sales and customer support for one of GE Energy’s new growth platforms in sensors. and distribution. Cataldo was a consultant with McKinsey & Co. OPTIMIZATION AND CONTROL. electronics. Serving GE since 1999. Cataldo has a bachelor of science degree in civil engineering as a Distinguished Graduate of the U. He has also served in Six Sigma leadership roles within GE Energy. as well as new product development and solution engineering.S. one of GE Energy’s new growth platforms in sensors. John Cataldo leads a global team in strategy development. OPTIMIZATION AND CONTROL. electronics. Services business of GE Energy.S.. he is responsible for establishing the company’s technology roadmap. With 10 years of experience at GE. Air Force Academy. UNITED STATES In his current role. This approach is applied to every aspect of the business. we should embrace it to challenge our own competitors. BERNIE ANGER GENERAL MANAGER. GE ENERGY. marketing operations. achieving our business goals despite the challenging market conditions we face. analysis.S. focusing on mergers and acquisitions for GE Energy Services—the US$7 billion U. Anger held several roles prior to joining GE Energy. Air Force pilot. 48 49 . analyzing what we call “destroy-the-business” issues that may come from outside our partner network. UNITED STATES Bernie Anger is general manager. it is not just leading-edge technology that sets our equipment apart. To do so. By harnessing innovation in this way and by achieving customer intimacy. Our philosophy is that if there is a groundbreaking innovation out there. in Atlanta. Anger has more than 15 years of experience defining and implementing world-class solutions for optimization and controls. We focus on imagination breakthroughs— US$100 million-plus ideas that can truly push GE forward and that have high visibility from our chairman down through the ranks. and in GE’s Corporate Business Development group. for GE Optimization and Control.C O N N E C T E D M A N U FA C T U R I N G D R I V I N G I N N OVAT I O N T O P OW E R T H E WO R L D We couple this internal R&D effort with a keen focus on what is happening elsewhere in the energy community.S. and software tools for energy industry-asset optimization. and a U. we will continue to rely heavily on technology—from computer control systems to information collation. Air Force Academy Dean of Faculty. software technology for GE Fanuc. including vice president. It is our ability to manage information to help customers optimize their investments. and a master’s degree in business administration as a Baker Scholar of the Harvard Business School. Cataldo previously led the Business Development group. not only to manufacturing. our GE Energy business will be able to sustain and grow its position. JOHN CATALDO GENERAL MANAGER. In his current role. chief technology officer for Total Control Products. Before that he was the executive officer to the U. and vice president of development for Taylor Industrial Software. After all. and software tools for energy industry-asset optimization. MARKETING AND COMMERCIAL OPERATIONS. GE ENERGY. Prior to joining GE. TECHNOLOGY.

with longer hours and fuller schedules. healthcare equipment manufacturers constantly search for ways to reduce device downtime and help caregivers manage assets effectively. which has begun to revolutionize the way hospitals and clinics maintain and repair their critical equipment. It’s unthinkable for a device to be out of service when a patient needs it. UNITED STATES 51 . GE Healthcare CEO Joe Hogan has stated.DIGITAL SERVICES is one way to apply today’s technology to propel healthcare into the future. they can detect warning signs of trouble in a device and dispatch a field engineer to fix it before the device fails and without the end user knowing anything was wrong. we don’t have to wait for technologies that will be available in 2025. As one step toward higher productivity. working with care providers on proactive and highly effective device maintenance and service programs. Instead. Digital Services for healthcare: technology that enables the human touch HEALTHCARE PROVIDERS TODAY FACE CONSTANT PRESSURE to improve efficiency and increase the quality of care. They also work their equipment harder. they turn to technical improvements in devices they use to diagnose and monitor disease. so that a field engineer does not have to visit the site. DIGITAL SERVICES. Furthermore. GE HEALTHCARE. they can focus attention on the most critical issues. these engineers can fix problems remotely. TO ADDRESS THESE CHALLENGES. Often.” That approach is at work in a model called Digital Services. As one result. making diagnoses. and act. Paul Mullen GLOBAL PROGRAM MANAGER. ordering replacement parts. online engineers check and monitor equipment from afar. GE Healthcare has found answers in the digital world. highly educated field engineers are freed from the tyranny of responding to the latest emergency. and completing repairs. The traditional model of service relies on field engineers traveling from site to site. “To take healthcare into the future. on secure broadband connections. Under the Digital Services model. We need only look at the technologies we have today.

Digital Services strengthens GE’s offerings in two key ways. The Life Sciences unit also makes systems and equipment for purifying biopharmaceuticals. Second. and eventually full software upgrades. magnetic resonance imaging (MRI) and computed tomography (CT) scanners. The Life Sciences section of the business delivers breakthroughs in drug discovery. That means the company can deliver higherquality service while freeing service people to give care providers more personal attention. and patient monitoring devices. more than 44. medical diagnostics. A new approach to service When it comes to Digital Services. the collection of service and repair data enables creation of a global repair database that helps service personnel diagnose problems and make repairs faster. patient monitoring. diagnose. In short. employing more than 45. Transforming care Headquartered in the United Kingdom. With expertise in medical imaging and information technologies. Digital Services reaches beyond service and repair. It encompasses capabilities from online software upgrades to operator training delivered by distance learning over secure broadband connections. and treat disease earlier. the business helps clinicians find new ways to predict. GE uses technology to multiply the expertise of some 4. optimized device performance. and biopharmaceutical manufacturing technologies.C O N N E C T E D M A N U FA C T U R I N G D I G I TA L S E RV I C E S F O R H E A LT H C A R E At the same time. diagnose.000 medical devices are connected to Digital Services. so that scientists and specialists around the world can discover new ways to predict. the company has steadily extended remote capability across its product line. Next came the ability to deliver basic software modifications. far more than for any other healthcare device producer. and treat disease. it has improved product maintenance. At first the technology was used to monitor the superconducting magnets in MRI scanners. and the latest in cellular technologies. most important. in the form of electronic medical records. Scientists and specialists around the world can discover new ways to predict. so that patients can live their lives to the fullest.000 service engineers. Service volume exceeds 11 million transactions per year. 52 53 . • Full use of device capabilities End-user benefits aside. biopharmaceutical manufacturing. improving the diagnosis with each recorded event. and treat disease earlier. GE Healthcare is a US$15 billion unit of General Electric Company. performance improvement. neurological diseases. Digital Services changes the service relationship between healthcare provider and supplier. store. drug discovery. increased the productivity of service engineers and. GE offerings enable caregivers to diagnose and treat cancer. To date. The company also provides information technologies that help clinicians collect. First.000 people worldwide and serving healthcare professionals and patients in more than 100 countries. GE Healthcare was first in its industry to apply remote digital technologies to service and remains the clear leader in the field. Today. diagnose. Digital Services data provides critical field information about device operation and quality—information GE’s design and manufacturing organizations can use in a continuing quest to build better products. and other conditions earlier. to healthcare providers online. GE has developed a digital knowledge database that learns as it is used. enhanced the quality of service to healthcare providers. The vision for the future is an "early health" model of care that focuses on earlier diagnosis and disease prevention. Digital Services began in 1989 with the introduction of InSite remote diagnostics. and access data about patients quickly and easily. heart disease. both to monitor individual systems for end users’ benefit and to generate intelligence on trends. Providers benefit from: • Shorter repair times and more equipment uptime • Lower overall ownership costs • Prevention of unplanned downtime • Assurance of high-quality images from sophisticated scanning devices GE Healthcare develops diagnostic instruments such as X-ray machines. Over the years. The system monitors the level of liquid helium that keeps the magnet at the cryogenic temperature (around 3 degrees above absolute zero) necessary for proper functioning.

Virtual assist training is growing rapidly: healthcare providers see it as an affordable way to learn and keep up with fast-evolving diagnostic technologies. repair time falls from four hours on average to 45 minutes. engineers can examine the performance of an individual device. or training. or training. many hospitals cannot justify in-person training at their site or at a manufacturer’s training center. Technologists watch as the instructor demonstrates complex procedures. end-user downtime was reduced by about 20 percent. The advantages of proactive service have been well-documented. Digital Services provides data that can be used to assess the long-term performance of equipment models and to make predictive recommendations. Digital Services has delivered tangible results for healthcare providers and GE Healthcare. the training is as effective as if the instructor were in the room. they can advise care providers who own that device when to start planning and budgeting for a replacement. the key to Digital Services is to understand that technology alone is not enough. as service data is collected about a specific model. provided with sophisticated X-ray systems used to diagnose heart disease. because the diagnosis has been made remotely. the device user calls the service center and describes the problem to an online engineer. Caregivers thus received more assurance of having scanners available to patients needing exams. and advise hospital personnel on ways to adjust usage to improve performance. Digital education Outside the service arena. demand a higher degree of care because a failure during a procedure could put a patient at risk. In early Digital Services experience. the field engineer arrives on-site fully prepared to make a quick repair and equipped with all necessary tools and spare parts. device downtime has dropped 40 percent based on average experience from 50 systems. and the more accurate GE decision support becomes. The temptation is to think of Digital Services simply as a way to drive out 54 55 . GE’s automated systems monitor the devices remotely and watch for operating anomalies that signal impending malfunction or failure. The organization’s culture must change to deploy the technology to maximum benefit. These systems can automatically dispatch a field-based or remote engineer to take action. the more data is collected. if engineers can use the data to determine the average lifespan of a device.C O N N E C T E D M A N U FA C T U R I N G D I G I TA L S E RV I C E S F O R H E A LT H C A R E At the most basic level. Then the instructor observes and critiques as the trainees practice what they learn. For example. the more the knowledge Protecting partnerships In service. the key to Digital Services is to understand that technology alone is not enough. repair. At a level more consistent with the concept of “early health” lies a capability called Proactive Digital Services. and repair costs have shrunk considerably. using their own equipment. and half of the remaining downtime was shifted from unplanned to planned. The engineer makes a diagnosis. These systems. Instead. During the pilot. Significantly. and if possible—as in the case of a software fault—carries out the repair online. a growing application of Digital Services is in training hospital staff members who use sophisticated diagnostic scanners. infrastructure learns. technologists train in their own facility. virtual assist training by distance learning is a practical alternative. the greater the benefit to patients and the higher the hospital’s return on investment. saving the user the inconvenience of waiting for an on-site service call. The instructor and technologists see the same screen. In today’s cost-constrained environment. infer from the data how the device is being used. brand-named Innova. For these providers. When a repair is moved from on-site to remote. repair. Over time. Because instructor and trainees share control of the system. Building the knowledge bank Besides improving repair productivity. GE pilot-tested the concept in 2004-05 on advanced CT scanners in place at multiple hospitals. If the online engineer cannot complete the fix—as in cases where a component has failed—a field engineer is dispatched. As with the diagnostic tools. Digital Services helps healthcare providers get quick solutions to device problems without having to wait for a field engineer. The better clinicians are trained on these systems. In a typical scenario. In service. In this scenario. Proactive Digital Services does not wait until the device user notices symptoms and calls for service. They interact with a GE instructor at a remote site through a high-speed broadband Internet connection.

Paul is the author of six U. care providers can receive Digital Services without modifying their firewalls or specially coordinated VPN connections. and he serves on the board of directors of charitable organizations in the United States and Guatemala. UNITED STATES Paul Mullen leads GE Healthcare’s Digital Services programs. financial. while business. proactive. GE HEALTHCARE. DIGITAL SERVICES. A 23-year veteran of healthcare engineering. Digital Services is steadily moving healthcare device service from reactive to proactive. marketing. leading statistical analysis of factors related to student achievement. who understand their equipment and their unique challenges. PAUL MULLEN GLOBAL PROGRAM MANAGER. patient information remains secure. and repair techniques. and increase care providers’ productivity and quality. in which all communication between the devices and GE is outbound. In this configuration. Such thinking ignores the reality that quality service in healthcare is built on close partnerships between service provider and clinician. The GE Healthcare service network uses Digital Services in large part to enable field engineers to spend less time replacing bulbs and turning wrenches and more time building mutually beneficial. strategic service relationships with healthcare providers. He is active in local schools. and business development. Even online engineers in remote service centers are locally assigned: device users who call have reasonable assurance of talking consistently to the same people. data management. GE addresses the concern with an approach unique to healthcare. and.C O N N E C T E D M A N U FA C T U R I N G D I G I TA L S E RV I C E S F O R H E A LT H C A R E cost by reducing labor and cutting staff. The connections operate freely. Digital Services also depends on secure connections: communicating with devices while protecting the integrity of the healthcare provider’s information. marketing. Hospitals are justly concerned about empowering a partner to reach into the hospitals’ networks.S. they have both network security and patient privacy concerns to manage. and has promise to help manufacturers enhance fleet lifecycle management. Digital Services is one way to apply today’s technology to propel healthcare into the future. GE continues to explore and deploy new generations of digital monitoring. improve product design. above all. 56 57 . That feature of the relationship does not change simply because more business is transacted digitally. and always by way of a secure sockets layer connection. patents in healthcare-related technologies.

Because our revenue split is changing. EMERGING BUSINESS. We have significantly increased our software. we are adjusting our resources accordingly. and market a broad range of semiconductors and complete system solutions targeted at a range of different industry sectors.and hardware-development resources in Asia using a design factory concept in Xian. China. The promise of RFID in the manufacturing value chain: “Eating your own dog food” DIETER MAY AND CHRISTIAN SUTTNER of Infineon Technologies discuss Infineon’s philosophy of mass customisation. according to Gartner. GERMANY 59 . We are upscaling our resources significantly in Southeast Asia. Established in Bavaria. we now enjoy the greatest growth in Asia—specifically in China. we were the fourth largest semiconductor player. or US$9. especially in R&D. CORPORATE STRATEGY. Germany. a market research firm.2 billion. from a revenue perspective. INFINEON TECHNOLOGIES AG. and includes digital. industrial.5 billion.000 employees and are becoming a truly global business. We design. manufacture. we were number five. Previously. We have approximately 35. Infineon’s current revenue is ¤7. computer. and research and development facilities (R&D) worldwide.CONNECTIVE MANUFACTURING is as much about connecting design and development between company and customer as it is about establishing importance within the company itself. Also. so we have made significant inroads over the last three years. we now have manufacturing sites on three continents. Our product portfolio comprises both memory and logic products. develop. as well as discrete semiconductor products and system solutions. About Infineon INFINEON IS A LEADING INNOVATOR in the international semiconductor industry. GERMANY Christian Suttner VICE PRESIDENT. In the first three quarters of 2004. security and chip card markets. INFINEON TECHNOLOGIES AG. Our products serve applications in the wireless and wireline communications. and look at how connected manufacturing involving the customer is essential for the future. where we Dieter May SENIOR VICE PRESIDENT. mixed-signal and analogue integrated circuits. automotive.

C O N N E C T E D M A N U FA C T U R I N G T H E P R O M I S E O F R F I D I N T H E M A N U FA C T U R I N G VA L U E C H A I N have about 1. Being connected is. used with permission. Ten years ago. Take mobile phones. Typically.000 designers. India. we work with first-tier players in the market on platforms. You can have conceptual development and architectural development wherever. and in implementing new technologies companywide. and we are making significant inroads—both in terms of testing ways to make the business more connected. We are bringing R&D resources closer to our customers. is critical for the successful implementation of new technologies. we have heavily ramped up our software competence centre in Bangalore. between manufacturer and customer. so we have a lead customer—one of our biggest is Siemens Mobile. Central governance. Building complete units is a new market requirement. Together we are developing platforms that we then market as a complete solution to second-tier customers who do not have the 60 61 . so it is no longer sufficient to sell just standalone components. Similarly. therefore. From product manufacturing to solution manufacturing A significant trend we are currently experiencing is the shift from a few products to complete solutions. used with permission. however. and so on. central to our future goals. everyone was selling individual components which a third party would assemble into a final product. you need to provide a total platform including certification and software platform specifications. From product to solution manufacturing OEM #1 Branding Product Definition Assembly & Logistics System Integration Chip Design Connected manufacturing impact for Infineon Connected manufacturing is about connecting design and development both within the manufacturing business and. Today. such as Universal Mobile Telecommunications System (UMTS) or General Packet Radio Service (GPRS). it is increasingly a project business dependent upon collaboration with our customers. which aligns with our philosophy of mass customisation. increasingly. in other words. Achieving transparency across the supply chain is a priority. We are able to design and build complete handsets for different platforms. products enhanced by software—which is more and more a value driver for our business—as well as services. FAB Water Fabrication SORT Water Sorting DIE BANK ASSEMBLY Assembly TEST Final Test DC Furnace Implanting Deposition Stepper Etching Wetting Water test Sawing Stock: Semifinished goods Die Bonding Wire Bonding Moulding Trim & Form Chiptest (Burn In) FRONT END BACK END Figure 1 Infineon Technologies. but it is mass customisation that brings you closer to the customer. This is a fundamental change to our business model. and we are increasingly introducing radio frequency identification (RFID) technology to achieve this. for example. both for our own business and for the businesses with which we work—our suppliers and clients. OEM #2 OEM #3 OEM #4 OEM #5 Visibility across the market chain Chip Manufacturing ASIC ASSP Systems Solutions Figure 2 Infineon Technologies.

because nowadays not everyone wants to buy similar kits. two weeks after Christmas. and Figure 3 Infineon Technologies. we have implemented many of the things we wanted to do. we strive to have good visibility about supply-chain data. we are looking at outside companies—and other industries beyond the semiconductor sector—where we can work together to satisfy mutual goals. and our ultimate goal is transparency throughout the production process. Being connected means greater visibility. Being connected is key for us to achieve all these business goals. We are not in the consumer business. But all you needed to do was to look at population sizes and penetration levels to see that this was unsustainable. the customer suddenly cancelled seven million. So we tried to build up much more transparency across the industry segments we serve. How to behave within these cycles is critical because there are huge investments to be made.C O N N E C T E D M A N U FA C T U R I N G T H E P R O M I S E O F R F I D I N T H E M A N U FA C T U R I N G VA L U E C H A I N MARKETING PLANNING design resources to develop these platforms from scratch themselves. a lot of potential to become as profitable as we would like to be. 62 63 . But there is still. but just as important is R&D execution—one of our key future priorities—where there is still a lot of work for us to do. and that this would go on forever. Looking at our corporate strategy. Then. In terms of our memory business. of course. in the mobile phone industry. Elsewhere. such as building up software competencies and shifting our R&D landscape. It is important for us to optimise our internal setup so that we are sure we are running our manufacturing plants with the best optimisation. too. is having a highly scaled platform that can easily provide mass customisation. But a significant challenge for us is industry cycles. and they must be made at the right moment in the cycle or else it can be very dangerous for the company. we think. our clear objective is to catch up with Samsung. one of our biggest customers on the mobile phone side told us they needed five million more mobile phone base chips. normally we have no direct linkage to the end customer. On the operational side. So we look at the distributors and retail outlets. we try to understand where the trends are going rather than relying solely on what the people at our customers are saying. For example. used with permission. The mobile phone business provides a clear illustration of why this is important for a business such as ours. for example. optimisation of manufacturing plants is a priority. But we wanted to change the strategy of our marketing to include the end customer. Time to market is obviously critical. You have to be much more focused toward the end customer and be able to challenge what your direct customer tells you. Closed loop between factory and sales planning SALES PLANNING SALES PLANNING Sales Forecast Sales & Marketing Forecast Allocated Constrained Forecast DEMAND PLANNING CORPORATE PLANNING A significant trend we are currently experiencing is the shift from a few products to complete solutions. customisation is expected. FACTORY PLANNING Production Request RAP UI Improving visibility and business intelligence Now. We need to become much more customer-focused—bringing resources much closer to the customer. but so. There was no visibility throughout the supply chain. Everybody believed there would be an additional 30 per cent growth in mobile phone sales in 2001. this started an initiative to get much closer to the end consumer. FORECAST TRANSFORMATION Unconstrained Forecast FORECAST ADJUSTMENT Forecasts and Capacity Allocation Orders & EDI Forecasts MASTER PLANNING Production Promise FACTORY PLANNING Constrained Forecast CAPACITY PLANNING CAPACITY FEEDBACK TOOL LOCATION PLANNING CORPORATE PLANNING Capacity Request Capacity Promise LOGISTICS PLANNING ORDER MANAGEMENT Supply Plan Online Supply Data Limited supply-chain visibility in the past Just before Christmas 2000.

we will connect the whole supply chain to RFID—from wafer delivery through our basic manufacturing plants processing the wafers. central to our future goals. is this because of tolerance of components. and how any new processes developed within the business are interconnected. RFID enables you to do so because it is automated— there is no way to fiddle with it. so that we always know where they are. We are also working hard to generate transparency throughout our own manufacturing process. RFID is an important area for us. of course. “Eating our own dog food” One of our internal RFID-related projects has connected the back end with our distribution centre. Naturally. and reduces the danger of human error. helping to ensure that RFID labels can be accurately read is critical. and if you have an extremely difficult environment when tuning tolerance levels. and you must closely monitor the efficiency of RFID measurement. leading to reduced data quality in our warehouse system. Today we know exactly where the interfaces are. Through RFID. We were quick to set up a corporate framework for RFID comprising five core processes. is what really counts. You can use different antennas. Such indicators give us time to think earlier about the decisions we need to make. While a bar code is a bar code—each is always the same: a set of black and white stripes—RFID is different. Now we can do that. This is because 100 per cent efficiency in RFID reading is not just about where you position the RFID tags. however. This example highlights the importance of RFID for outsourcing and other partner-integrated processes. other components that might be affected are far easier to trace. So it is not so much about the system as the system process. so you may only be able to use higher-quality products. then you must understand exactly why.” You have to evaluate the system and be prepared to tweak and tune the entire setup consisting of chips. and what they need. We now do this for all of our industry segments to generate much better planning throughout. with an integrated supply-chain management process that has been completely redesigned over the last year to allow for new tools and systems such as RFID. such as add a consulting fee into our system (because it had no product part number). If we 64 65 . 10 per cent of the RFID-tagged parts. In this way we will be able to track and trace everything we need. we discovered that some of the processes we assumed were in place were actually ineffective. and RFID is playing an important role here. along with platform pricing for our customers and selling added value for our overall platform solution. Yet companies trip up. we detected these ineffective processes and were able to rectify them. we were unable to do a number of things previously. Every chip and every antenna has some tolerance built in. Being connected is. you may only be allowed to use a lower tolerance. There is direct communication and. to draw our own conclusions. to the back end and on to the customer. You cannot just think “This is another bar-code-like system and I’ll just put the reader here. we had discussions about an expected dip affecting the market. RFID is automated. and we are now measuring what the improvements are. You must have the most appropriate scanning device for the job. and we were able to put what we call a “smart savings programme” in place before the downturn worsened to avoid layoffs and so on. however. or something else? Maybe you need a stronger electromagnetic field or to shield the environment to prevent disturbance from other electromagnetic fields. Because of the introduction of RFID. therefore. Our wafer boxes now contain RFID. the reader not being strong enough. both for our own business and for the businesses with which we work—our suppliers and our clients. the challenge is to create visibility in systems you do not directly control. If you are failing to read. how the processes are working. the shortcoming with RFID is not the technology itself. The aim is to learn in year one before rolling out RFID companywide thereafter.C O N N E C T E D M A N U FA C T U R I N G T H E P R O M I S E O F R F I D I N T H E M A N U FA C T U R I N G VA L U E C H A I N and beyond. Previously we relied on bar codes. Using the information smartly. And with every part labelled. antennas and readers (again. if there is a problem with a particular one. with options for different electronics and antennas). no more handwritten data. We produce the RFID tags but not the RFID readers. Today. The second thing we have been doing is developing a scenario model and an early-warning indicator system that allow us to forecast turning points and the strength of an upturn or downturn eight months ahead. In February 2004. Ideally. Because our supply-chain process was focused on components. say. but finding enough people able to implement it properly.

and to implement it we needed total trust in data coming from the production process. so helping to ensure that workers around the world can collaborate and benefit from new technologies for their own personal development is key. we offer RFID to the market through our RFID SCM solution business. We are watching these technologies closely—especially from the perspective of our mobile phone business. then so much the better. which makes new installations a lot faster and more cost-effective. from wherever they choose.C O N N E C T E D M A N U FA C T U R I N G T H E P R O M I S E O F R F I D I N T H E M A N U FA C T U R I N G VA L U E C H A I N introduce new technologies that result in major changes to a process. of course—if you want to be a solutions provider. Since no appropriate software was available on the market. The new. which is a short-range technology. Looking to the future. Store a dynamic random access memory (DRAM) chip one month longer than necessary and the financial value of that chip decreases. which we believe constitutes a real market breakthrough. the head of logistics is the owner of the demand-tostock process. which is critical to achieve truly connective manufacturing. we are considering how Bluetooth. Access to these buildings is via smart cards. The head of strategy is responsible for the vision-to-plan process. again. is also about using new technologies for working collaboratively. and it is global. and. But RFID is not just about financial value. Components remain our core business. and this is the nature of the business in which we operate.” This has been a transition we have been working toward for the past five years. Given our lead experience and the widespread demand from companies introducing RFID. wireless local area network (WLAN) and Zigbee will develop.000 staff in an open campus). In fact. where we help customers to set up RFID based on our RFID hardware and software expertise and operational experience. Looking further ahead. however.” where we preconfigured and tuned all RFID hardware components to suit particular environments and applications. In this industry. and a third is looking at the wireless conductivity perspective. we immediately see the impact on other processes. We also developed a “tube approach. Innovative enabling technologies Today there is a lot of attention on RFID. our global network could well be used for mass customisation. first-level managers. Being connected. because the value is very high on very small items within our supply chain. We have process owners within the business to deliver this—typically. we built a partnership with SAP offering end-to-end RFID solutions. A key component for efficient installation and operation of an RFID hardware infrastructure is middleware software that provides RFID reader management and supply-chain management/enterprise resource planning (SCM/ERP) system connectivity (or connects to the next middleware layer). For example (aside from Bluetooth). but one that encompasses all of the wireless standards. centralised process frameworks we have introduced over the last year are part of a move away from the traditional focus on supply chain in favour of viewing the production process as “idea to 66 67 . Central governance has been a major change. Internally we have wireless LAN access in our main building. and will typically be business driven. Managing and implementing this comes down to central governance. But software and services are an add-on—if we can make money out of it. individual personalisation of The investment in RFID must be justified. For example. we built our own. RFID is also about time. then you must dominate at least one element of the value chain in which you operate. The question will be: Does it work from a power consumption point of view? Two of our business groups are pursuing this. there must be a business case behind all this. Obviously. product. we will use our own technology. the competence for short-range wireless has moved to our wireline business where we basically need a home gateway—not only a faster Ethernet gateway. Wideband will have far-reaching implications on wireless standards. Global connectivity is especially important on the design side of the business so that our designers can access our IP database anytime. The time may come when end users detail their own personal requirements for true. It is a real-time network. time is of the essence as our goods decrease in value so quickly. since two years from now it will probably be desirable to combine a WLAN and a normal GPRS transceiver into a single chip. We are an increasingly global business. Our estimate is that we are currently saving thousands of euros. as the investment in RFID must be justified. and will have the same in our new headquarters (currently being built to house 7. Our estimate is that we are currently saving thousands of euros because the value is very high on very small items within our supply chain.

individual personalisation of products. essentially. Germany. GERMANY Dieter May joined Infineon Technologies AG in 2000 as vice president. In 1997.C O N N E C T E D M A N U FA C T U R I N G T H E P R O M I S E O F R F I D I N T H E M A N U FA C T U R I N G VA L U E C H A I N products. In 1992. he joined IBM in Bordeaux. especially in more complex products. In 2000. Munich. After receiving his master’s degree in microelectronics at the University of Erlangen-Nuremberg in 1990. Customization is in line with our vision of a future in which collaboration between ourselves and our customers becomes the norm. CORPORATE STRATEGY. corporate strategy. wireline infrastructure. is as much about connecting design and development between company and customer as it is about establishing the importance within the company itself. Silicon Discretes in Munich. he was promoted to global telecommunications market manager. rather than at the point of sale. such as base chips for mobile phones. of course. as a project leader for applied research in failure analysis for integrated circuits. in Munich and Phoenix. And it will be in the negotiation phase that customer specifications are discussed and agreed upon. In 1996. Inc. Mass customisation for us is slightly different: it is about having a platform approach with which you can serve a small number of customers with minor adjustments. In 2002. corporate strategy. he joined Motorola. Since writing this essay. Logic IC Division. because you need to know in the design phase exactly how well your production process is behaving. INFINEON TECHNOLOGIES AG. Summary Connective manufacturing. he joined Booz Allen Hamilton. EMERGING BUSINESS. May has left the company. dependent on us and we. depend on our customer. It is essential to control both design and manufacturing. INFINEON TECHNOLOGIES AG. The relationship will increasingly become an implicit joint venture because each party is so closely interlinked: the customer is. he was founder and managing director of Cirrus Management Consulting GmbH (strategy consulting) and Early Capital Partners GmbH & Co. he was consultant and engagement manager at the international strategy consulting firm Booz Allen Hamilton. then.. Since writing this essay. DIETER MAY SENIOR VICE PRESIDENT. 68 69 . working as a strategy consultant in the field of mobile network operators. and in 1995 wrote his dissertation in computer science. KG (technology investments). In 1999. and in 2003 was named senior vice president. Standard Components Group. CHRISTIAN SUTTNER VICE PRESIDENT. Arizona. In 2005. This detailed degree of understanding will be an increasingly important differentiator between competing manufacturers in the years to come. Munich. May was appointed senior vice president. Suttner has left the company. Already you can log onto the Nike Website and design your own shoes. France. The time may come when end users detail their own personal requirements for true. Suttner was a director at the international investment company Antfactory. and energy companies. as European marketing manager. GERMANY Christian Suttner was named vice president of emerging business at Infineon Technologies AG in 2004. Suttner carried out scientific research at the Technische Universität München from 1990 to 1996.

the Juha Räisänen VICE PRESIDENT AND HEAD OF DELIVERY SOLUTIONS. In 2004. Nokia is now organised into four business groups.AS THE MARKET LEADER. solutions and services for network operators and corporations. DEMAND SUPPLY NETWORK DEVELOPMENT. Nokia business structure AS A RESPONSE TO NEW MOBILITY OPPORTUNITIES and increasingly intense competition. media. serve all business groups. which in 2004 turned more than 60 billion components into products. Horizontal entities. This enabled Nokia to continue as the largest mobile device manufacturer in the world. With a highly efficient demand-supply network.3 billion. The company connects people to each other—and to the information that matters to them—with innovative. In terminals businesses. Nokia drives the growth and sustainability of the broader mobility industry. If you take into consideration that camera phones made in 2004 already represent half of the company’s volume. There are a number of fundamental differences between our infrastructure and terminals businesses. and considering the complexity of its products. and its global market share was 32 per cent of the estimated total market of 643 million handsets. enterprise solutions and multimedia (see Figure 1). This includes mobile phones and solutions for imaging. Nokia is arguably also the leading computer manufacturer in the world. and businesses. With those figures. games. The world leader in mobile communications. FINLAND 71 . The first of these groups is infrastructure business networks. our role is to drive the industry into new mobility areas. such as the one I manage as part of customer and market operations. NOKIA CORPORATION. Nokia is considered to have logistics expertise comparable to that of Dell or Cisco®. Nokia posted net sales of ¤29. easy-to-use products. while the other three are terminals businesses—mobile phones. Producing the right products at the right time: steps toward mass customisation NOKIA PROVIDES EQUIPMENT. then Nokia is also the leading camera manufacturer in the world.

From a consumer point of view. distinct industry dynamics. Retail business is fast-paced. and Operating Resource Sourcing Figure 1 Nokia Corporation. bring new products to market with good quality and deliver orders reliably. Having a pocket camera available all the time has changed the way people can interact: they can capture events or even emotions at any moment and share them instantly with other people. Innovation here means the ability to include new design elements or product features that add value for customers. in recent years. Succeeding in the mobile terminals business is not about moving manufacturing to the cheapest labour-cost countries. Strong brand preference creates volume pull from the point of sale toward the channel and. Nokia did not follow. Operational excellence includes the speed with which an organisation can implement new initiatives. nowadays we are speaking about months. helps increase market share. where Nokia has been the first to introduce a truly useful innovation. Now. Venturing. During the last decade. This strategy is quite different from that of our competitors. our role is to drive the industry into new mobility areas. it’s about managing the whole demandsupply network most effectively while at the same time being agile and 72 73 . We see our role as an orchestrator in the value chain. it took years to bring a new device to various markets. for instance. such as including a camera in a mobile phone. Research. Across all of our businesses. and tools. Business Infrastructure. however. and we keep most of the manufacturing in-house. how we manage the demand supply network is critical—specifically. used with permission. Rather. Product innovation and ergonomics have been strengths for Nokia for some time. systems. end-to-end demand-supply network. how we collaborate with our partners and how we set up our core processes. Nokia has become the preferred mobility brand for consumers around the world. Despite the new drivers for the terminals businesses. combined with our lucrative product offering and reliable delivery. keeping core activities in our own hands and utilising outsourcing opportunities where they make sense from the perspective of an efficient. therefore. the potential market is huge. the basic principles of how we set up manufacturing and manage the whole demand-supply network remain unchanged. On the other hand. NETWORKS ENTERPRISE SOLUTIONS Technology Platforms MOBILE PHONES MULTIMEDIA Cornerstones for success Nokia is striving for superior competitiveness in the following three areas: brand. The immense size of these markets means that being first to market is less important than being the first to produce a new cost-efficient concept for the masses. In contrast. magical solution such as outsourcing. There is no single. with its own. infrastructure business is much slower. Creating visibility is the key to fast response and flexibility. as there were no obvious benefits from that product concept. pace is set at the retail point of sale. half of the volume of phones sold has a camera embedded. Communication and mobility are two basic needs for every human being and. As the market leader.C O N N E C T E D M A N U FA C T U R I N G P R O D U C I N G T H E R I G H T P R O D U C T S AT T H E R I G H T T I M E Nokia business group structure Customer and Market Operations flexible enough to adapt to fluctuating needs. requiring quick reactions and foresight from the whole supply channel. Concurrent engineering in a cross-functional process mode is key to products getting to market faster. a manufacturer built a mobile phone into a wristwatch. The new organisational structure helps us drive the mobile communications industry toward something beyond the plain mobile phone. where “true” consumer demand meets the “true” supply from the channel. Some years ago. there are other numerous examples. product and operational excellence. “added value” means the new product feature offers sensible uses for the majority of consumers.

which creates challenges when combining all information to create a reliable market picture. Also. we have achieved good results for our trade customers during the last few years by first ensuring the reliability of our service. it is also crucial to integrate the systems and provide fast channel information visibility. so that our customers can plan their business knowing that Nokia delivers on its promises. and what must Connected Suppliers NUMBER OF ROSETTANET & EDI CHANNELS IN USE 1H03 2H03 1H04 Years 2H04 1H05 Figure 2 Nokia Corporation. After achieving reliability and predictability. be done to stimulate demand. retailers. and there are many companies dependent on us. But we still have a lot to do in integrating suppliers’ processes with ours—both in having information on the status of manufacturing with their suppliers. Much work is still to be done in connecting processes between corporations. Collaboration starts with process alignment between the companies. global model exists and where every market carries its own characteristics. The number of connected suppliers is rising steadily Communication and mobility are two basic needs for every human being and. is what really counts. there is still much to do with our suppliers. On the supplier side. long-lasting process because it’s built on trust—and trust isn’t achieved overnight. Good collaboration with all customers is crucial. Visibility requires collaboration Nokia operates in the middle of the value chain. but they are not really the key factor. Markets are not alike in various parts of the world. Reliability creates predictability. Using that data sensibly and collaboratively. and making joint decisions based on that data. used with permission. RosettaNet is the standard system-to-system interface that we promote to both customers and suppliers. Gathering and handling sales channel data requires systems and tools. Creating visibility is the key to fast response and flexibility. in the United States. For instance. 74 75 . therefore. The roles of operators. and distributors. which products are selling below target. We must understand how the markets behave and what’s happening right now in each of them—at the point of sale. as mentioned earlier. To achieve this degree of understanding. retailers. The next step is to increase speed of the service. closer collaboration with all of our customers is critical. The first step is customer-by-customer joint process development. and giving them real-time information regarding developments in Nokia and our markets. Channel information availability and accuracy vary from customer to customer. leading to complex distribution landscapes where no single. we have been able to proceed faster—for years there has been a mutual understanding of the importance of channel information visibility. the quality of market information still needs more attention. why that’s happening. When it comes to tools and connectivity. although. whereas in many Asian markets it’s distributor-driven. there are also some partners with one-to-one electronic data interchange (EDI) interfaces. the business is operatordriven. we can introduce new services. Joint planning processes focus on understanding the point-of-sale channel information visibility and knowledge about which products are selling well. We provide basic demand visibility to our suppliers on a weekly basis.C O N N E C T E D M A N U FA C T U R I N G P R O D U C I N G T H E R I G H T P R O D U C T S AT T H E R I G H T T I M E In the delivery services area. and distributors in the handset supply chain vary slightly from market to market. It requires us to continue building upon several previous mutual successes. With tens of thousands of different sales package variants. the potential market is huge. Developing customer collaboration is a slow. We can classify our trade customers into three categories: operators.

so that we have processes and systems to run the infrastructure project. Much work is still to be done in connecting processes between corporations. by the way. Eventually. Future developments: RFID Cost-efficient utilisation of radio frequency identification (RFID) is an example of a technology enabler that will. The initial usage examples. The scope of customisation will be the device (both hardware and software) and the sales package and its content and services we provide for customers. Increased customisation will reduce the average lot sizes both for us and for our suppliers. True. Take. The first step is customer-by-customer joint process development. such as letting consumers configure their products. and crosscompany collaboration between demand-supply network partners. Creating visibility is the key to fast response and flexibility. Although lead times of projects are long. running campaigns in our terminals businesses is actually a function of project management. about how to make personalisation cost-efficient. Good collaboration with all customers is crucial. and integration of materials and resources with those processes and systems. Examples of this are the tools and systems for the field sales force or field support staff. integrated project management. There are. There are. Full material visibility. though. then. is the critical first step. 76 77 . RFID will become an important element in increasing mobility opportunities. Utilisation of mobility solutions New solutions based on mobility provide opportunities for productivity leaps. for example. and conversely. Cross-utilisation of processes and systems between our various businesses is an area on which we will focus more in the future. we have already gained remarkable benefits by having real-time material visibility due to our global. Customisation capabilities open up new possibilities for personalisation as well. for instance. which resembles integrated project management in our infrastructure business. which aren’t as shock-resistant and compact. These leaps can be achieved by creating solutions that streamline processes by automating and integrating them through mobile connectivity. many similarities between terminals business processes and infrastructure business processes. when the price of the RFID tag becomes cheap enough and the reliability of the reading technology becomes mature enough. harmonised transaction system platform. real-time information about the global material situation is vital. do not bring us there yet. Customisation Advanced customisation capabilities will be crucial in the future. materials. Our current company structure supports this approach well. We are active in developing solutions for people on the move using our own company as a test bench for the solutions. the applications of RFID will be seen everywhere in our daily lives. There are still some open questions. Especially in situations where there is a short supply of some components. Electronics components need to be on time in factories. we’ve been customising for some years already—compared with the time when we had three mobile phone models that were all black. Creating mass customisation capability requires close cross-functional work within Nokia. they do benefit from realtime material visibility. of course. generate new productivity leaps. Information can be made available for everybody who needs it on the site of the information source. in the future. We are now implementing the same platform and processes into our infrastructure business as well. The next step is integrated project management. in which RFID technology can bring new value and better information quality. which are more or less about replacing bar codes with RFID tags. we now have tens of thousands of sales package variants that we produce daily in small lot sizes—but we can go much further. For instance. but the components are not the main issue—you need resources. and products to get a site up and running. RFID technology also opens up new opportunities in the areas of transportation security and channel visibility. Mobile phones have been built to last even in rough conditions—unlike laptops. The mobile phone is a natural base when we select devices for any mobile connectivity.C O N N E C T E D M A N U FA C T U R I N G P R O D U C I N G T H E R I G H T P R O D U C T S AT T H E R I G H T T I M E Key focus areas in the infrastructure business Within the terminals businesses. also areas where the infrastructure business networks group has been pioneering processes. as well as for travelling managers or on-site project staff.

Previously. and sourcing for Europe and Africa. where he was in charge of outbound logistics for mobile phones in Asia-Pacific and demandsupply network process development in the Asia-Pacific region. ranging from supply chain consultancy to leading the systems integration and software development business units for industry customers in Finland. Räisänen worked for more than 10 years for Fujitsu/ICL in various positions. We don’t have too many years to implement this. he spent more than four years in Singapore and Hong Kong as vice president. He has achieved success in assuming both executive-level line management positions within manufacturing. Since writing this essay Räisänen has left the company. however— in today’s environment. DRIVE QUALITY FOR COMPETITIVE ADVANTAGE CUSTOMERS ENSURE FLEXIBILITY AND TRUSTED SUPPLY CREATE AND MAINTAIN TOTAL COST LEADERSHIP ProcessIntegration Capabilities Supplier Capabilities People and Competencies Figure 3 Nokia Corporation. Räisänen worked for more than two years in Finland as vice president of operations. and sales.C O N N E C T E D M A N U FA C T U R I N G P R O D U C I N G T H E R I G H T P R O D U C T S AT T H E R I G H T T I M E The framework for Nokia’s continuous focus on its customers JUHA RÄISÄNEN VICE PRESIDENT AND HEAD OF DELIVERY SOLUTIONS. 78 79 . Asia-Pacific logistics. New processes and systems are needed. we will need to combine economies of scale and agility. DEMAND SUPPLY NETWORK DEVELOPMENT. for Nokia Mobile Phones. We strive for closer collaboration and better information visibility through real-time connectivity. but the key to success is enthusiastic. FINLAND SPEED UP PRODUCT & TECHNOLOGY INTRODUCTION Juha Räisänen was formerly in charge of delivery process and solutions for Nokia and led the Demand Supply Network and Care Development initiatives globally for all Nokia businesses. and committed people who know how to implement those new ideas. logistics. bright. logistics. Prior to joining Nokia. used with permission. even three years is an eternity. NOKIA CORPORATION. Before that. and in managing development and consultancy organizations. Summary To succeed in the future.

C O N N E C T E D M A N U FA C T U R I N G 2 CONNECTED SUPPLY The pioneering companies in this book are not simply looking for lower-cost sourcing— they are creating an entirely new model. and to innovate more rapidly and efficiently. The smooth passage of information across the extended value chain allows them to use new customer approaches in both developed and emerging markets. 80 .

for years. and by eliminating the wall that. industrial Ethernet is revolutionising network communication in industrial automation. ARC ADVISORY GROUP. With its universal acceptance in the IT world. While standard “office” Ethernet with TCP/IP has been used in manufacturing applications at the controller level for more than a decade. Ethernet builds bridges between factory and corporate information systems by reducing network requirements to a single architecture. GERMANY 83 . From harsh environments to high-speed performance requirements. ARC ADVISORY GROUP David W. these modifications have opened up countless new application areas for industrial Ethernet. This information is used in real time by sophisticated maintenance or condition monitoring software to predict service problems before they happen. has separated the plant from the business world. Ethernet’s ubiquitous IP addressing and routing capabilities enable a level of transparency never before seen in what previously was the domain of proprietary industrial networks. solid grounding in international standards. ETHERNET ’S VALUE PROPOSITION to manufacturers lies in its ability to enable a single network architecture across all enterprise levels—from robot cells to business applications.ETHERNET’S VALUE PROPOSITION to manufacturers lies in its ability to enable a single network architecture across all enterprise levels. it also supports the proliferation of open standards in the factory. allows new generations of asset management solutions to extract data directly from networked sensors in the factory. Using Ethernet at the device level. Harry Forbes SENIOR ANALYST. Humphrey SENIOR ANALYST. for example. shortening machine downtime and lowering operational costs. Industrial IP and Ethernet come of age INDUSTRIAL INTERNET PROTOCOL (IP) and industrial Ethernet have come of age. While this strategy lowers maintenance costs and increases network serviceability. Ethernet has now evolved enough to suit the particular needs of industrial users. and a wide base of future development directions.

have no doubt propelled growth in this space. End users have come to realise the potential offered by Ethernet and TCP/IP protocols for endowing devices with Web-based access and similar services. During the past few years. but also by standardising on the protocol layer by enabling quality of service and security end to end.000. but the same is not the case for these industrial devices. where Ethernet is now dominant. is not standing still.000.0 1. Asia-Pacific companies are likely to overhaul current proprietary strategies with IP-enabled plant and IP-enabled building devices during the next two to four years. A large number of forces are contributing to the rapid growth of Ethernet networks at the device level.0 0. Their familiarity with the potential benefits of such services. despite challenging times and competition from more traditional and entrenched device networks. we see the uptake of IPv6 (next-generation Internet Protocol) increasing more rapidly as U.000. combined with Ethernet’s multiprotocol ability and the many strategic advantages that come with support for TCP/IP. However.0 6. Ethernet and the TCP/IP protocol suite are inseparably linked in the IT world. Ethernet technology. Many of these same factors have propelled this acceptance to higher levels of the automation hierarchy as well. indicate that widespread adoption of Ethernet will offer new opportunities for advances in automation and for simplification of systems integration.0 3. used with permission. amid no small fanfare (see Figure 1). which are also where acceptance of industrial Ethernet is highest. despite a difficult worldwide market for automation equipment. have distinct requirements. While many diverse kinds of devices incorporate Ethernet interfaces. however.000.000.S. Battle lines have now been drawn between two major camps: Rockwell Automation in North America with EtherNet/IP and Siemens in Europe with Profinet.0 2. These kinds of developments have been elusive during the decades-long struggle over the digital industrial Fieldbus. and many product lines that support multiple device networks have added Ethernet support as well. mainly. Development of industrial Ethernet protocols and industrial-hardened products has taken place mostly in North America and Europe. Both in industrial automation as well as in building automation. In addition to ongoing research and development efforts within the IT sectors and academia.0 Units (in thousands) 5. however. In Asia-Pacific. Industrial Ethernet is no different. The aggregate market volume for industrial Ethernet devices has grown more than 50 per cent annually during the last few years. Not all of these requirements are addressed by today’s industrial Ethernet technology or products.C O N N E C T E D M A N U FA C T U R I N G I N DU S T R I A L I P A N D E T H E R N E T C OM E OF AG E The worldwide industrial Ethernet device market (thousands of units) 7. a growing number of suppliers are working to create 84 85 .0 2004 2005 2006 Years 2007 2008 2009 Figure 1 Source: ARC Advisory Group © 2003. Automation suppliers have always used industrial networks both as door openers and as tie-in strategies to bind customers to their products. These lines were fortified in 2004 through endorsements by General Motors for EtherNet/IP and a consortium of Germany’s top four automakers for Profinet. which give market strength to the various device networks (see Figure 2). Market interest in these new products has been keen. Device-level industrial networks. their proprietary strategies. and European camps drive. adoption of a common physical layer. and with Ethernet in general. and the markets there for industrial Ethernet are currently wide open. despite difficult conditions in the overall automation market and global economy. Asia-Pacific suppliers and end users have been more passive in the network arena. a large number of Ethernet-based industrial devices have been brought to market.000.0 4. We believe this strategy will force market leaders to standardise using IPenablement of their products and services portfolio—not just by standardising on Ethernet. they have little in common other than their Ethernet physical layer.000.

which overwhelmingly employ TCP/IP. In some cases suppliers have chosen deployment of Ethernet as a pure physical layer. users are uncertain of what constitutes a set of reasonable performance benchmarks. Ethernet-enabled products tailored for industrial use. Also. creating the potential for vendor differentiation via proprietary extensions. given the recent arrival of Ethernet at the device level. especially power over wire 86 87 . discarding TCP/IP at the lowest level in favour of protocols that can give higher performance in small devices. end users remain in a learning mode with respect to adoption. worldwide IT industries • Ethernet’s higher degree of protocol independence • Growing availability and variety of industrial Ethernet products • Ability of industrial Ethernet products to address wider markets • Expected future Ethernet capabilities. end users have much more limited experience with new industrial Ethernet products. Major automation suppliers. One gauge of supplier interest in Ethernet is their willingness to deploy Ethernet in applications whose real-time performance requirements stretch the limits of Ethernet’s capabilities. which Ethernet has spurred. In most cases. following the bursting of the Internet bubble market that fed their growth through the late 1990s. Key factors now contributing to the success of Ethernet at the device level include: Supplier deployment of Ethernet pushes real-time limits Ethernet devices fit naturally into information-oriented applications. which is the overriding concern of the manufacturer. they are willing to adopt products that carry some risk of vendor-lock in return for simplified performance metrics that allow them to proceed faster with system-level • Ethernet’s widespread commercial acceptance • Ethernet’s position as a common network architecture • Ethernet’s presence in vast. suppliers have chosen to supplement TCP/IP with other protocols or capabilities that allow them to extend Ethernet’s reach deeper into the real-time arena. which is a long-running issue for end users and suppliers alike. Ethernet loses its key advantage as an enabler of potentially worldwide remote access and service through Web technologies. used with permission. End users are working with such products with a view toward creating both a greater experience base and a simplified set of benchmarks or design rules that will provide them greater assurance—not only of device interoperability.C O N N E C T E D M A N U FA C T U R I N G I N DU S T R I A L I P A N D E T H E R N E T C OM E OF AG E Industrial Ethernet is penetrating networking domains traditionally served by well-established fieldbuses and device networks End users benchmark Ethernet products and solutions With so much recent expansion in the supply base of Ethernet products. In many cases. Suppliers find that the level of inquiry regarding their new Ethernet products is significantly higher than Ethernet’s current share of shipments. While there is vast experience with Ethernet per se. End-user reluctance toward new Ethernet products is shared in the area of distributed automation capabilities. In such solutions. some of the larger IT-related suppliers show a renewed focus on the manufacturing sector. suppliers remain optimistic that significantly higher volumes are in the offing. In general. and the number of products that currently support them is limited. but also of overall system performance. These technologies are still being developed. Supervisory Control I/O Device NETWORK LEVEL TYPE OF CONTROL Machinery Process Figure 2 ARC Advisory Group. however. are promoting these technologies as competition moves away from vendor control of automation networks.

the concept of intelligent implementation will extend to a much broader concept that includes a corporatewide view of network security. it results from the requirement that all enterprises will inevitably face with their networks and operations as they begin to deal with service delivery to mobile and wireless clients as opposed to fixed desktops or work cells. Such introductions will be fuelled by new hardware platforms that will support not only Ethernet. and will take some time to penetrate the industrial space. In the future. The platforms incorporate lower power consumption and battery life extension as part of their base-level features because they are targeted specifically at battery-powered and handheld devices. The need for intelligent implementation. we found that their practices and policies vary widely—a fact that can only partially be explained by variables. While the majority of manufacturers have defined such networks. such as service provision. as will the relentless technical progress Ethernet enjoys due to its massive worldwide adoption. full-duplex channel • Packet collisions are eliminated through active switching • Connection of plant networks to the enterprise network is managed In the future. the concept of intelligent implementation will extend to a much broader concept that includes a corporatewide view of network security. emphasizing that as difficult as they may be to gauge. such as vertical industry and size of the enterprise. routing. in contrast with much of today’s officeoriented hardware and chipsets. This benefits Ethernet deployment because much of this off-the-shelf capability is oriented toward Ethernet devices. greater experience will alleviate this concern. and the solutions created in that domain can be adopted by Ethernet in manufacturing. Again. enterprises of all sizes now already depend upon large Ethernet and TCP/IP networks for their routine business processes. 88 89 . • Each device sees a full 100MB. the next one to two years will see the introduction of many small devices with new sets of capabilities. The concept of “intelligent implementation” for industrial Ethernet has been defined as a network design where the following characteristics exist: Future device platforms spur both Ethernet and wireless Improved tools for embedded systems now allow suppliers to employ much more device capability directly from their development environment. The results underline the importance of not making generalisations about plant-floor network practices—they vary widely within the manufacturing sector. Intelligent implementation now extends to administration Ethernet networks in automation must be implemented by design rather than in an unplanned fashion.C O N N E C T E D M A N U FA C T U R I N G I N DU S T R I A L I P A N D E T H E R N E T C OM E OF AG E designs. Ethernet’s ability to simultaneously support multiple communication protocols matches the features of these embedded toolsets to offer a cafeteriastyle menu of features. incremental risk and benefit are the relevant metrics for formulating network policies. whereas. firewalls and network security. device networks require a completely distinct skill set that is in significantly shorter supply. The changing face of plant-floor networks In a recent survey. Rather. In the longer term. Ethernet and TCP/IP can draw from a much larger pool of human resources and information resources for support than any other network. These new platforms are initially targeted at the high-volume consumer and IT segments. ARC investigated manufacturers’ practices with respect to plant-floor or process-control networks. can be met without creating a barrier to Ethernet adoption. Furthermore. but also embed sophisticated support for secure wireless communication. In addition. The need for design rigour extends from the physical planning of the network to its more IT-oriented properties. Ethernet networks in manufacturing represent one special case of support requirements. This issue will need to be managed in the IT domain. this is not a problem caused by Ethernet in manufacturing per se. while significant. Thus their design basis makes them better suited for industrial requirements.

such as equipment condition monitoring. they remove external Web browsing and external e-mail. In the following analysis. this separation point is designed to be a well-guarded boundary. from where. The next question we asked was: “Which technologies do you employ to isolate this network from other networks and back-office applications?” Respondents were allowed only a single choice from a menu of increasingly stringent separation options. While such plant networks are a distinct minority. and not only within small enterprises. A third of the respondents maintain separate networks. “Who is allowed access to the plant-floor network. When we asked. but do not need to keep their own information stores and resources within the highly restricted plant-floor network. we found that the majority of plants provide access only at the manufacturing location or at a limited number of locations within the plant. We received 186 responses. Only 10 per cent of respondents reported that they ran remote service offerings provided by their equipment OEMs. Some manufacturing operations network their PC-based plant-floor equipment and apply their normal IT practices to add such systems to the enterprise network. then. securing. Clearly. Hence. Original equipment manufacturers (OEMs) and automation suppliers were less likely to enjoy this privilege. The downside of this benefit is the added cost and complexity of administering separate networks. ARC found that roughly one-third of respondents allowed software services. “Does your plant have a separate. as have the responses of equipment suppliers. In terms of what kind of work could be done remotely. or equipment configuration to be done from a remote location. Remote monitoring and troubleshooting were much more prevalent: only 10 per cent did not permit any remote operations. we asked. ARC found that these repondents come from a variety of industries. upgrades. The most popular is an application with access to the plant floor that provides a widely accessible service on the enterprise network. Manufacturers. These companies do tend to be from discrete rather than process manufacturing operations. Asset management applications. In effect. while more than 40 per cent use firewalls and 14 per cent use virtual private networks. geographies. The caution with which manufacturers grant access to these networks suggests that factory equipment suppliers and solution providers will have greater success with expanded offerings if their products can utilise a manufacturer’s enterprise network rather than the plant-floor network—the former network will offer far fewer barriers to integration. which are major sources of virus and spyware infections. interoperability and interchangeability between machines. our conclusions find that it is important not to generalise about plant-floor network practices. The survey also found that 70 per cent of respondents require a separate authentication process for access to their plant-floor network. This application is a common configuration for many data historian packages. The appeal of physically separate networks from a security standpoint is understandable. Achieving each will be critical for businesses if they are 90 91 . ARC found that roughly one-third of respondents allowed software services. especially in the coming era of wireless sensor networks. and company sizes that are not significantly different from the entire sample. First. Maintaining strict network separation also inhibits the integration of these manufacturing operations with enterprise applications—a high price to pay for incremental security. or equipment configuration to be done from a remote location. accessing. and administering process-control or plant-floor networks. can be designed to work this way. specifically identified process-control or plant-floor network?” More than 80 per cent of survey respondents answered “Yes. A number of different technologies are used to implement remote access to the plant-floor network. and for what purposes?” When we asked these questions. these responses have been excluded. the PC acts as a layer of isolation between automation networks and enterprise networks. they do exist.” The more interesting question concerns the companies or locations that do not differentiate the plant-floor network. and optimal networking solutions—are all in place if they are to realize truly connected manufacturing. must ensure these three fundamental building blocks—appropriate machine selection. These applications can use existing services for obtaining the plant-floor information they require. and that incremental risk and benefit are the relevant metrics for formulating network policies.C O N N E C T E D M A N U FA C T U R I N G I N DU S T R I A L I P A N D E T H E R N E T C OM E OF AG E ARC surveyed manufacturers’ practices for isolating. “Who is allowed to have access to the plant network?” the interesting result was that almost half of the respondents allowed some nonplant personnel to access their networks. upgrades. but a quarter of the respondents did let automation suppliers or OEMs have access. but this small percentage included respondents from several major manufacturers.

Before joining ARC in 2002. and E. as well as a member of the OMAC (Open Modular Architecture Controls) Packaging Workgroup Executive Committee. HARRY FORBES SENIOR ANALYST. advanced control and optimization. He is responsible for ARC’s influential “Ethernet at the Device Level” study and has also written for Control Design and Power magazine. packaging. and network security. Safetybus Systems. In addition to automation. 92 93 . HUMPHREY SENIOR ANALYST.Business Strategies for OEMs. and Wireless I/O: The Electrician’s Radio. system integration. as well as a master’s degree in business administration from the Business and Economics University of Vienna (WU Wien) and the University of South Carolina. marketing management. sales. and industrial networking teams. IEEE 1451: Less is More . Germany office. Forbes received a master’s degree in business administration from the University of Michigan and a bachelor’s degree in electrical engineering from Tufts University. TCP/ IP. with a concentration in international business. RFID: A Considerable Speck. Not Your Father’s EPRI: New Life for Old Nukes . He has authored the following ARC publications: Capital Expenditure Survey (annual). ARC ADVISORY GROUP Harry Forbes is part of the Collaborative Manufacturing and Automation consulting team at ARC. automation system sales. and industry conference publications. he worked for several years for Raytheon Company in the United States. Humphrey is part of the automation consulting team at ARC. covering manufacturing topics in Europe. he worked for Invensys.C O N N E C T E D M A N U FA C T U R I N G I N DU S T R I A L I P A N D E T H E R N E T C OM E OF AG E to adapt to tomorrow’s demand-driven business model. simulation modeling. Forbes also has more than 25 years of experience in power generation. GERMANY David W. An expert in process automation. Before joining ARC. industrial network technologies. Management of Industrial Ethernet Networks . and engineering of major PAS and training simulator projects. industrial energy management. Humphrey was area manager for automation solutions in Rockwell Automation’s Munich. Forbes is an author in the areas of automation network architecture and power generation. Humphrey looks at economic topics affecting manufacturers and is the author of ARC’s annual survey report on capital spending. He consults in the area of industrial networks—from Ethernet and device networks to wireless— for clients in power generation and industrial generation management. He is a member of ARC’s hybrid manufacturing. In addition. His ARC articles include Will Cogeneration Go ‘Micro?’ . and product marketing management. Humphrey holds a bachelor’s degree in electrical engineering and computer science from Stevens Institute of Technology. DAVID W. PLC Supplier Preferences. ARC ADVISORY GROUP. where agility and flexibility will provide the responsiveness on which manufacturing operations will depend for future success. where his assignments included project management.

In doing so. parts obsolescence.000 stock keeping units (SKUs) to a billion customers in 178 countries. COMPANIES OUTSOURCE elements of their supply chains and rely on partners to develop.SMOOTH EXECUTION of supply-chain operations relies on appropriate execution of business processes across the whole value chain. including suppliers and partners. and 119 logistics providers. WITH THE PASSAGE of NEW LEGISLATION related to safety and environmental concerns in many countries. Hewlett-Packard (HP) has integrated several approaches to develop an adaptive supply chain designed to cope with disrupting events such as changes in market demand. 88 distribution hubs.3 million cartridges. and distribute their products or services. or disruptions in manufacturing or logistics while at the same time improving profitability. manufacture. In this essay we address how leading companies may want to look at their partner ecosystems to improve their responsiveness while reducing costs. An electronically connected supply chain is the means to achieve this. Christian Verstraete SENIOR DIRECTOR. 110.500 servers to markets daily via 11 routes. Developing an adaptive supply chain through partner collaboration INCREASINGLY. HEWLETT-PACKARD COMPANY. delivering more than 200. An adaptive supply chain HP’s supply chain manages about US$51 billion of the company’s spending. The company ships 1. 700 suppliers. and 3. they rely on networks of suppliers and service providers to establish a sustainable. 75.000 printers. competitive advantage and increase shareholder value. Such networks are usually referred to as ecosystems or extended enterprises.000 personal systems. MANUFACTURING AND DISTRIBUTION INDUSTRY SOLUTIONS. such extended enterprises must consolidate product and process-related information across company boundaries. UNITED STATES 95 . HP’s supply chain coordinates the activities of 32 manufacturing plants.

Furthermore. 96 97 . HP has adopted industry-standard supply chain operational reference (SCOR) processes. Learning from the approach taken with the CMs. This required developing trust between HP and its partners and proved to be a time-consuming task. which enable cross-company comparisons to be made within the sector. strategic initiatives. This means HP can focus on areas where it lags and re-engineer strategic processes. The Supply Chain Council runs regular benchmarks. with the objective of passing most of the business through them. This. business processes. 2006. Twice a year. A governance structure covering both the central teams and the businesses has been operational for the last four years. HP then created a Manufacturing Outsourcing Strategy Team (MOST) and identified six preferred partners. as recent as the late 1990s. Over the last year. including contracts. processes. and technology. service-level agreements. HP outsources up to 90 percent of its manufacturing. in turn. the use of original design manufacturers has grown as HP increasingly developed new products in partnership with other companies. so close integration with contract manufacturers (CMs) is a must. while executive sponsors partner with the CMs’ top management. This structure centralizes management of the overall relationships with contract manufacturers. HP expanded the role of MOST and renamed it the Design & Manufacturing Outsourcing Strategy Team. • Low-touch: products made by HP and shipped in bulk • Configure-to-order: customer-configured products via multiple supply chains • High-value solutions: vertical and customized solutions • Services: spare parts for warranty and repair HP addressed this complexity from three angles: people. MOST is responsible for growing the relationships strategically. To achieve this. providing a timely escalation path if needed. and reviews. This approach is a real asset when unexpected events occur. Risk mitigation and scenario planning smooth out this disruption by identifying alternative business processes and supply sources. used with permission. Customer • No-touch: products shipped directly from contract manufacturers to customers and partners Processes When collaborating with partners. helps the company improve those processes where it finds itself lagging. People An efficient supply chain means working closely with key suppliers and building collaborative relationships.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N Hewlett-Packard’s supply-chain activities Demand Shaping Direct Functional SupplyChain Excellence Order Fulfillment Logistics Planning Manufacturing Procurement Design for Supply Chain No-Touch Low-Touch Configure-To-Order Design/R&D Consumer SMB Public Sector Enterprise High-Value Solutions Indirect Service Figure 1 Hewlett-Packard. For example. HP was working with 55 different CMs. HP’s supply chain is regularly disrupted by hurricanes that affect its Taiwanese suppliers. getting a clear definition of process and who performs them is critical for smooth operations. HP outsourced most of its supply chain and standardized all supply-chain activities into five categories: Nonetheless. Day-to-day relationships are handled by the businesses. This reference model has given HP the opportunity to benchmark itself against other companies. based on SCOR’s key performance indicators (KPI). and was not a significant customer for any of them. MOST and segment managers review the business with each contract manufacturer and examine strategy developments. In the late 1990s.

HP looked outside the electronics industry to find creative ways of approaching partner collaboration. 99 . alternatively. send and follow up on purchase orders. this means that HP can share forecasts. especially in the IT industry. used with permission. entering requested information. which enables secure execution of transactions between partners. and because they have only limited visibility into the reasons behind that variability. by which a small variation at one point in the supply chain propagates with ever-increasing amplitude through the whole chain. such as RosettaNet or electronic data interchange. HP has developed a methodology for managing variable demand and for mitigating risk. where demand can vary significantly and prices can drop suddenly. When using KeyChain. Reliant on an Internet backbone. KeyChain manages both communication approaches mentioned above and integrates the information supplied with the HP back-end systems. leaving the supply chain with unwanted inventory. The result is a drastically varying inventory. HP created a private hub called KeyChain. 98 2 0 0 10 20 30 40 50 60 70 80 90 100 Time (weeks) Figure 3 Hewlett-Packard. based on changing demand. but provides translation capabilities for suppliers using nonstandard formats. Suppliers see the varying demand. Variable demand is one of the biggest cost components. they use planning assumptions that may not reflect the real demand.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N Infrastructures To facilitate collaboration and accelerate information transfer with its partners. they can perform business-to-business transactions between their systems and KeyChain. 2006. HP favors the use of standards. KeyChain™ logical integration architecture UI Optimizing the supply chain In its continuous quest to reduce costs related to the supply chain. used with permission. 4 Suppliers can interact in two ways with the system: They can log onto the hub and browse their private pages. as shown in the architecture presented in Figure 2. KeyChain™ marketplace Guaranteed delivery Notification and error handling wM B2B Legacy System Databased routing B2B gateway B2B server HPSB Back-end System ERP System Pub/sub req/rep store/fwd Batch server UI CAF Top tier Stocking level for nonsynchronized orders DTS 6 Units of stock (thousands) HEWLETT-PACKARD TRADING PARTNER Buyer Supplier Stock Levels Figure 2 Hewlett-Packard. This mechanism leads to excess inventory and shortages that become very costly. and support supplier-managed inventory collaboration models. 2006. Many companies have experienced the “bullwhip” or “forester” effect. Figure 3 represents the variation of stock.

Known as supplier-managed inventories (SMI). the price of memory dropped more than 80 percent in 2001. So. In 1999 and 2000. long-term contract with a major flash supplier. faster reactions. the Next Generation Partnership. For example. as well as significant changes in current business processes and concurrent management of change investment. HP White Paper. supplier inventory would be kept under control (see Figure 4). Inventory collaboration (SMI & DR) contributes dramatically to synchronizing the supply chain. With strategic partnerships. DR needs high levels of supply chain systems integration (which may preclude some partners from participation). HP operates in a highly volatile market. and what would be the best time to sign the agreement? To address these questions. If suppliers could see the real customer demand and shortages. while global visibility of inventory and demand allows for better decision making. preemptive resolution of supply-and-demand imbalances across multiple HP sites and suppliers. 2006. but taking them a step further. then tripled within a threemonth period. The system uses statistical commodity-price forecasting analytics that can account for unexpected turns in cyclical markets and technology trends. Building long-term relationships with suppliers in such a market requires risk mitigation. HP developed a framework called procurement risk management (PRM). Uncertainty about the future prices and availability of flash memory—and about HP’s own demand—made specifying terms and conditions for the contract very difficult. Prices and availability of semiconductor-based components reflect significant uncertainties.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N Stocking level. and how should it structure its payments? • How much should it buy. 100 101 . HP entered into a binding. the technique was pioneered by Wal-Mart and Procter & Gamble. and lower cost. the rewards can be substantial. HP White Paper. synchronized orders 6 Units of stock (thousands) Buyer Supplier 4 DR removes HP from tactical supply-chain management and gives trading partners the information they need not only to manage variability in HP demand. similar to the financial models used on Wall Street. March 2003. Management of stock available in the supply chain implies giving suppliers visibility into real customer demand. 2 Procurement risk management** 0 0 10 20 30 40 50 60 70 80 90 100 Time (weeks) Figure 4 Hewlett-Packard. HP had to evaluate the following questions: • What should it pay for flash memory over the next few years. complex environments. HP faced significant price increases and an availability shortfall for flash memory that adversely affected its printer lines’ profitability. however. Such dramatic and unpredictable swings in component * Inventory Collaboration. • How long of a horizon should the contract cover. To assure future availability of flash memory. effectively shortening it and increasing inventory velocity. HP automatically calculates optimum stocking levels and dynamically adjusts shipments based on the supply chain’s current status—a process known as dynamic replenishment (DR). This is especially beneficial in multitiered. The result is quick. ** Procurement Risk Management. and to protect its printer profits. used with permission. An even better approach is allowing suppliers to manage inventories. and how should it structure delivery terms? Dynamic replenishment* Using the same principles. March 2003. but also to keep their production lean and efficient.

HP has come to realize the importance of considering manufacturing facilities when developing new products. HP has expanded the “design for manufacturability” concept. spot Directed Storage Supplies Laser Jet Supplies Turnkey Original Design Manufacturers Demand forecast (units) 300 200 Base Flexiblequantity contract HP Manufacturing Content Figure 6 Hewlett-Packard. Examples include designing packaging to maximize the number of products on a pallet. PRM allows greater flexibility to capture cyclical and technological trends. with the aim of enhancing profitability through the use of packaging-optimization tools. Additionally. HP has used PRM for many commodities since 2000. 2006. popular in the 1990s. while recognizing the volatility of their demand. And only by integrating more closely with 102 103 . and postponing and standardizing components. used with permission. and supply-chain costs. saving hundreds of millions of dollars in the last four years. HP’s suppliers then face risks such as capacity underutilization. but advanced companies have found ways to reduce these costs drastically. inefficient finished goods. Product demand is also uncertain. supply-chain simulation models. used with permission. 2006. By combining stock-market techniques and in-depth knowledge of the IT industry. to include the supply chain. this allows portions of the product-design process to be performed by partners. HP has mitigated its risks. along with strategies developed by HP specifically for each product family. Partner collaboration by electronic means is critical to the design process. which increases costs. PRM recognizes the volatility of demand (see Figure 5). suppliers factor those costs into their prices. HP has developed a process to trade off supply-chain responsiveness and material. Further savings can be realized only by integrating the supply chain with both design and demand chains.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N prices can render finished products unprofitable. 100 Low scenario 0 Time Fixed-quantity contract Figure 5 Hewlett-Packard. reducing transportation costs. Moving forward The supply chain is always under cost pressure. especially when prices are negotiated months in advance based on highly uncertain forecasts. Hewlett-Packard’s procurement risk management Supply-chain design In-house Ink Jet Supplies NS server Digital Publishing HP Design Content Leveraged Ink Jet Hardware Std server Notebooks Scanner Laser Jet Hardware Cameras PC Unix/Alpha server Storage Joint design 400 High scenario Uncommitted volume. As a result. and to help mitigate the risk of running out of components. as both parties need access to product specifications and engineering changes to shorten a product’s time to market. and inventory write-downs. By outsourcing its manufacturing. and parts-reuse analytics.

HP uses process standards such as SCOR*. Integration requires two approaches. one needs to document processes. but End-to-end business processes All companies must manage both market variability and disruptive events. One may want to take advantage of these features and document processes along the whole chain to help ensure a consistent and lean execution of the entire supply chain. Visualization of cost of latency Quality Business or environment change Time Company reaction to change Latency { • Decision Latency + • Change Design Latency + • Change Implementation Latency + • Validation Latency Figure 7 Reactions to events involve latency—if latency can be minimized it will reduce costs and lead to a more efficient supply chain. Doing the same across the supply chain has a similar effect on the extended enterprise. and will it require a change in supply-chain processes? * See SCOR version 7. such as material shortages and component obsolescence.0 Overview at www. 104 105 . Defining business processes clearly. In Figure 7. As this model addresses only the supply chain and describes neither design activities nor customer interactions. First. The models also establish key performance indicators for each of the major processes. the shaded area corresponds to the lost opportunity (the smaller the surface of the shaded area. second is how closely the change addresses the new situation (quality). In Figure 7. and performing scenario-planning exercises ahead of time. First is the speed of the organization’s reaction (latency).supply-chain. we visualize this by assuming a step-change that triggers a response in four distinct categories in the business environment: • Decision: Will the event have a lasting influence on the supply chain (for example. operational effectiveness can be compared. used with permission. This process creates an understanding of the steps executed and streamlines operations. or do key business processes require redesign? • Using end-to-end business processes to cope with variance and unexpected events • Change implementation: How long will it take to make the changes work? • Developing a portfolio of collaboration approaches to create a sustainable. measuring them. both of which require connectivity at the business level: • Change design: Do new partners need to be integrated in the supply chain? Do inventories or demand levels need to be adapted. 2006. Key performance indicators are typically measured at a company level. competitive advantage • Validation: How do we assess the effectiveness of the changes? Two key elements are then used to measure the quality of the response. and benchmarking other companies all help improve an organization’s responsiveness. These models have been handed over to the Supply Chain Council as standards in their own right. the supply chain operational reference model. this involves designing and documenting supply-chain business processes. HP has extended the concept and also uses two similar models: DCOR (for the design chain) and CCOR (for customer interactions).C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N key suppliers and partners can the supply chain be made more agile. eliminating transient variances). As outlined earlier. By comparing a company’s KPI results with those of other companies. clearly establishing them to help ensure a consistent execution. An agile supply chain can minimize lost opportunities by reducing latency. the better the response). All three models define how business processes interact with those of suppliers and distribution partners.

Such suppliers require attention and should be approached differently. even harm the success of the end product in the marketplace. making it difficult to visualize the end-to-end process. giving a first glimpse at where improvements can be made. No communication standards exist at the business-process level yet. however. whether product or service. This means commodity partners and key suppliers need to be treated differently. price should not be the only factor under consideration. Proper identification of the transactions executed between partners. measuring. to make sure that the usage of the supplier’s products and services is optimized in the end product. PUL. they include codevelopment and R&D. such relationships go beyond the delivery of goods and services. including suppliers and partners. Today. allows an understanding of how the process evolves. collaborative approach. Verstraete.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N to measure a supply chain’s effectiveness. as cost is the only factor in the relationship. but a win-win approach is needed to secure the supplier’s willingness to build a collaborative relationship. smooth execution of supply-chain operations relies on appropriate execution of business processes across the whole value chain. In many situations. optimal working relationships with key partners are essential. used with permission. shipment notifications establish that the contract manufacturer has finished the manufacturing process and Example of information—process linkage Contract Manufacturer shipped the goods to the 3PL distribution center. Documenting. Once the relationship has taken that new. 106 107 . In the example in Figure 8. Partner segmentation and collaboration* As we see in Figure 8. commodity partners can be approached in a confrontational manner. Having those suppliers working with the competition may. Cost is important and a fair price should be paid. When negotiating with them. in some cases. however. This requires the establishment of trust. Philippart. Where multiple supply sources exist. Deciding whether to keep the supplier at arm’s length or whether electronic interactions are required is important. which may take time with partners who have previously been treated confrontationally. For the best outcome. Wynen. Suppliers of key goods and services that differentiate the end product are instrumental in that product’s success. * Collaborative Sourcing. this can be achieved only by reviewing members of the extended enterprise separately. Such visualization provides visibility into how activities are executed across the extended enterprise. but cost negotiation is key. This allows identification of problem areas. 2006. Too many companies have approached business partners in a confrontational manner. and visualizing business processes will provide many opportunities to improve supply-chain operations across the extended enterprise. October 2005. KPIs should be measured at an extended enterprise level. the development of common business processes and the establishment Data Gathering Shipment Notification Order Moves to 3PL Distribution Stage CM/ODM Contract Manufacturer Store 1 Dist West Parts Tier 1 Store 2 IDS Air Shipment Store 3 Manufacturer 3PL Dist Dist Central Store 4 Parts Tier 2 Contract Manufacturer 2 Store 5 Figure 8 Hewlett-Packard.

and demand management. competitive advantage. MANUFACTURING AND DISTRIBUTION INDUSTRY SOLUTIONS. as establishing such relationships takes time and effort. Such collaborative approaches require a new breed of professionals. and understanding where bottlenecks exist. Working closely with key suppliers. demand chain.200 global consultants who design and deliver solutions in the areas of supply chain. they can establish a network of 108 109 . Belgium. in business development. Commodity Confrontational Collaborative Nature of the relationship established Figure 9 Hewlett-Packard. companies can improve the efficiency and agility of their supply chains. CHRISTIAN VERSTRAETE Cost-Focused Reduce cost of nondifferentating components to lower final product/service price Nonconfrontational Spend effort and cost with no benefits to product or service SENIOR DIRECTOR. and project management. as well as for the design of industry-specific go-to-market initiatives and solutions. marketing. of appropriate infrastructure components that securely interact with each other will foster the relationship—and establish a robust platform for cooperation. HEWLETT-PACKARD COMPANY. procurement and sourcing. In addition. Belgium. Verstraete holds a degree in mechanical engineering from the Universite Catholique de Louvain in Louvain-la-Neuve. 2006. and collaborative business integration. based on HP’s own best practices in supply-chain management. both regionally and worldwide. which consists of 1. He also ran the manufacturing practice within HP’s Consulting & Integration business unit. representing more than US$5 billion in revenue for HP. Companies need to connect their supply chains to enable a constant flow of information among partners. and are now focusing on supply-chain design. and help to ensure a sustainable. This often implies single sourcing. Over the years he has advised multiple Fortune 100 companies on how to use their IT assets to create additional stakeholder value and embrace new market opportunities. UNITED STATES Christian Verstraete has been a member of Hewlett-Packard’s management team for more than 20 years and today manages the development of the solutions HP proposes to the manufacturing and distribution industries.C O N N E C T E D M A N U FA C T U R I N G D E V E L O P I N G A N A DA P T I V E S U P P LY C H A I N Partner and supplier segmentation framework Differentiator Nature of the product/service sourced Aggressive Always takes a confrontational approach to supplier management. and has a degree in industrial management from Katholieke Universiteit van Leuven in Leuven. Prior to his current role. They position the chief procurement officer as the person responsible for the company’s external resources. Verstraete has held a variety of management positions. improving the satisfaction of their end customers. product lifecycle collaboration. often not available in today’s procurement departments. used with permission. risking alienation of suppliers Collaborative Ensure exclusive use of differentiating components to establish uniqueness of product/service Target Avoid partners critical for differentiation of their end product. consulting. Verstraete directs the alignment of internal organizations and external SI/ISV partners for integrated solution value chains for the manufacturing and distribution industries. providing early notice of problem areas and. By looking at business processes across the extended enterprise. interaction of the design and demand chains. Verstraete has led the high-tech industry practice. ultimately. visualizing them. Summary Advanced companies have spent much time and effort optimizing their supply chains. Single sourcing will force buyers to mitigate risk and have alternatives ready in case of failure.

but the majority of our suppliers are small and medium-sized. METRO is investing time and resources into optimising its supply chain and its practical support of suppliers of all sizes through connectivity. we share the same goals as our suppliers: to fulfil the requirements of our customers and to meet their expectations. As a retailer.7 billion product turnover. GERMANY METRO GROUP IS ONE OF THE WORLD’S LEADING international retailing groups with operations in 2. we have to understand how we can best connect the demand side—the customer—with the supply side. MAKING A COMMITMENT TO NEW TECHNOLOGIES IS WHAT METRO GROUP In keeping true to its word. Expectations of manufacturers: connecting demand side with supply side IS ALL ABOUT. however.” We are decisively reshaping the international world of retailing through our commitment to new and emerging technologies. Our corporate philosophy is summed up by the brand message “METRO Group—The Spirit of Commerce. and who needs to trigger which activities at which points in time to make the supply chain work effectively and guarantee a seamless flow of product and information. local operations 111 .A LACK OF VISION and both entrepreneurial spirit in top management levels of retailing and manufacturing is a major issue affecting modernisation of the retail industry. collaboration. we carry the burden of helping them become more efficient and productive in the supply chain. This knowledge is a basic prerequisite. Obviously. Zygmunt Mierdorf MEMBER OF THE MANAGEMENT BOARD. This means we must ask ourselves whether we understand the individual processes in the supply chain: who has which responsibilities. For many small and medium-sized suppliers. we have suppliers at certain sites who possess the organisational and intellectual capacity to understand this. METRO GROUP. and networking.200 locations across 30 countries. To achieve this goal. and who work closely with us to improve supply-chain processes. METRO Group closed 2005 with over ¤55. We have some 200 large international suppliers.

Metro Link has become a major information source and connectivity hub for our suppliers. a browser. Surprisingly. the 80:20 rule applies perfectly to our supplier structure—the majority of volume is sourced from the major suppliers. We must work with smaller suppliers—some of whom still manage their supply chain manually—to simplify and accelerate their supply chain through new technology. But we also are prepared to invest in infrastructure to enable our small and medium-sized suppliers to attain the same level of connectivity enjoyed by our larger suppliers. we typically end up testing it with one of the three aforementioned suppliers. For example. therefore.C O N N E C T E D M A N U FA C T U R I N G E X P E C TAT I O N S O F M A N U FA C T U R E R S in product categories such as dairy. or in their approach to the collaborative process. it is all about gaining a better understanding of their information requirements. as is Nestlé. In addition. We expect our international and large suppliers to be early adopters of new technologies and business processes. a long process to get non-FMCG suppliers on board. As a result. qualified and sufficiently resourced in terms of manpower and funding. Once a project is successful with one of these partners. and to participate in pilot tests of these technologies and processes in day-to-day operations. therefore. which can be purchased for ¤500. But we also are prepared to invest in infrastructure to enable our small and medium-sized suppliers to attain the same level of connectivity enjoyed by our larger suppliers. they fully subscribe to our vision of networking and collaboration within the industry. The only cost to suppliers is the licence they must acquire to use some of the applications. Our experience shows that it is difficult to get top-class consumer electronics companies to participate. and to participate in pilot tests of these technologies and processes in day-to-day operations. 112 113 . how to fulfil them and how to guarantee they receive the real-time data they require. Because they are locally oriented. We know that small and medium-sized suppliers do not have the financial or human resources to implement the technologies needed to optimise their supply-chain process all by their own. we have an optimal structure for only part of our supply chain. we usually start to roll out the technology throughout the whole organisation. We built this solution to centralise our data. what internal changes they must make and why those changes will benefit both them and us. are well organised and prepared to support the supply-chain optimisation process. these suppliers have limited knowhow about global initiatives and activities that could improve their supply chain. For many companies. As a retailer. As in any business. and a software program. Every time we want to try something new. We offer this free of charge—all suppliers need is a PC. meat and vegetables. The challenge is to raise the small and medium-sized suppliers to the level of the big ones. they usually lag far behind regarding adoption of electronic data records relating to data pools. we have to understand how we can best connect the demand side—the customer—with the supply side. It is. But this does not necessarily mean that the majority of the process and workload are associated with the big suppliers. We expect our international and large suppliers to be early adopters of new technologies and business processes. A good example of this is the investment we made in our IT infrastructure to enable suppliers to connect to our network. Metro Link. from both a technology and collaborative standpoint. we have a clear responsibility to communicate with partners and suppliers so that they understand what we expect from them. There are a number of excellent suppliers who. because they are organised. To achieve this goal. To achieve this goal. bakery. So we have to help them by offering these kinds of technologies. the bulk of this testing is done with fast-moving consumer goods (FMCG) companies. we share the same goals as our suppliers: to fulfil the requirements of our customers and to meet their expectations. Otherwise. Kraft Foods is another good example. A good example is our supplier portal. facilitate rapid data exchange with partners and provide real-time Web access to essential information. We have learned that one of our best partners in testing new business processes and technologies is P&G.

we are also active in driving international standards and business-process optimisation within retailing through our membership in the Global Commerce Initiative Board as well as the EPCglobal board and the GS 1 board. and so on. packages. present the biggest obstacle to supply-chain optimisation. moving upstream from the manufacturer’s distribution centre into its production facility. we try to convince suppliers to incorporate new technologies. helps to reduce inventories and lowers costs —to the benefit of manufacturers. Aside from our involvement with specific technologies. they needed several different barcodes for their packaging. Thanks to RFID. we tried to envisage how we might be using this technology 15 years from now. We did not begin with a complete RFID vision—it evolved as we learned more about the technology and how it could benefit certain business processes. Once we understood this. We have helped move the industry toward a single global standard—the 14-digit barcode. The rollout began in November 2004. The response was very positive. while Europe (13 digits) and Asia employed other standards.” This discussion usually occurs when it comes to business cases. We expect that RFID will have a tremendously positive impact on our business. however. If manufacturers sold their products globally. A good example of one such standardisation initiative is the bar code. we require standardisation of data and business processes. To overcome these. A lack of both vision and entrepreneurial spirit in top management levels of retailing and manufacturing is a major 114 115 . We have the “downstream” part in order. The upstream part. it appears that IT service providers are more concerned with protecting their own property than with implementing standards that could benefit the whole industry. It is not our role to put significant pressure on suppliers to change their individual environments. In addition. used 12-digit barcodes. and on to the raw material suppliers. it is now possible to seamlessly trace the route of a product. In this way. We hope our experience will open the door for others within the industry to “join the club” and support us. Instead. METRO Group is one of the world’s first retailers to introduce Radio Frequency Identification (RFID) technology along the entire supply chain. In the past. and Galeria Kaufhof sales divisions of METRO Group. standardize innovations. The next big challenge is making the EPC code a global standard. Initially. is where suppliers must now concentrate—and we encourage them to do so. We included distribution centres in the RFID roll-out so that we run the merchandising through either direct delivery from the manufacturer to the store or a distribution centre to the store. rather than technology. we need much better networking and collaboration with our suppliers and service providers. Our RFID rollout focuses on automation of processes for incoming and outgoing merchandise and on warehouse management. adopt business process optimisation. the U. This accelerates processes. Often. we held two RFID summits for our key suppliers. It is not our role to put significant pressure on suppliers to change their individual environments. Talks typically start at the door of the manufacturer’s distribution centre and go downstream to the retail-store level.C O N N E C T E D M A N U FA C T U R I N G E X P E C TAT I O N S O F M A N U FA C T U R E R S Improving the supply chain is about collaboration and partnership. we gained an understanding of how the process works. from its manufacturer to the store shelf. and explained our roll-out plans and vision.S. and in order to control the different business formats that exist within our various business units. metal and certain liquids. within their own supply chain “upstream. Standards and networks are vital prerequisites for efficient. and shipments of hanging merchandise) and retail units (cartons. Our starting point is applying RFID on the logistics side—to pallets. and want to keep it under our control. People. for example) are equipped with RFID transponders. retailers and customers. As we become more international. involving over 40 suppliers as well as selected warehouses and stores of the Metro Cash & Carry. for example. The retail industry has some reservations about RFID. Additional stores and suppliers in Germany will be added in the future. Real. including how to apply RFID tags effectively to pallets and how to deal with physical problems we encountered when using tags with glass. We openly discussed existing problems with the technology. collaborative supply-chain optimisation. logistical units (pallets.

Germany. they should communicate their overall vision more effectively. and that if we can achieve this connectivity. however. enterprise architecture standards—and later. Over the past 15 years or so. Most of the people in our industry agree that this technology should be implemented. ZYGMUNT MIERDORF MEMBER OF THE MANAGEMENT BOARD. where millions of transactions and a tremendous amount of data have to be analysed. for that reason. He is also an adviser for several different sales lines. therefore. and. logistics. it appears that IT service providers are more concerned with protecting their own property than with implementing standards that could benefit the whole industry. Understanding. Maybe it is the nature of their business. for example. It is clear that there is a big difference between technology companies and the rest of the business world. for example thanks to RFID. it is now possible to seamlessly trace the route of a product. METRO GROUP.” But this attitude is not beneficial to the industry. he was administrative managing director at Betrix Cosmetics. ROI is not just about technology. the British magazine Retail Week named Mierdorf “Best IT retail professional” of the year. Data warehousing was not possible 10 years ago. Look at the adoption of data warehousing technology to support complex business processes. Take chip cards. where he is responsible for the company’s IT. only a relative few top executives have a real understanding of what this will mean for the industry and the supply chain. but because they now must think in a more qualified way about their business processes and business in general. Our starting point is applying RFID on the logistics side—to pallets. The technology will provide intelligent outcomes only if organisations ask the right questions first. from its manufacturer to the store shelf… Another major obstacle is the pervasive pressure we all face to justify capital investment. we have learned that the creation of technology usually occurs much faster than the adoption of business processes to enable efficient use of that technology. say. e-business. Prior to joining the METRO Group. they are much more advanced in using tools to improve both connectivity and their internal and external business policies.C O N N E C T E D M A N U FA C T U R I N G E X P E C TAT I O N S O F M A N U FA C T U R E R S issue affecting modernisation of the retail industry. At the same time. GERMANY Zygmunt Mierdorf is a member of the management board and chief information officer of the METRO Group. we will all benefit from a seamless flow of information and merchandise through the supply chain—without manual intervention. There would be tremendous cost savings for the whole industry. it has created a climate in which long-term visions and a certain level of entrepreneurship are very difficult to find. Group. There is a view that technology still may not be advanced enough to fulfil all requirements for chip cards. people tend to lean back and say. Often. if you talk about global data standardisation. In June 2004. group chief financial officer and chairman at LRE Inc. human resources. we have seen our people struggle to understand how to use technology—not because the technology is complex. He joined the METRO Group in 1991 and held several executive positions before becoming a member of the management board in 1999. and real estate divisions. with an emphasis on proving a return on investment (ROI) within a short payback period. is a fundamental issue for all of us. then. We can all learn from them. they should start to build standards into their applications and be more prepared to use an open-sourced application structure. EPC and business process standards—were reflected in an application’s setup. That is why I believe there is a role for technical service providers to become more involved in the improvement of supply-chain processes. Second. and chief financial officer at Black & Decker. It would be extremely useful if. 116 117 . but is easily done today. “Let’s wait. For example. But short-term focus on ROI is a problem generally in today’s business world. First. This would automatically help drive companies toward standardised business projects. then.

and analyze the cause. Nissan has achieved financial recovery by closing inefficient factories—curbing purchasing costs drastically—sharing operations with Renault. The main aims are to 119 . JAPAN Nissan’s manufacturing objectives At Nissan Manufacturing. AFTER DIFFICULT TIMES IN THE LATE 1990S. Tennessee. The company’s latest N180 plan targets sales of an additional 1 million vehicles every year. is the heart of Nissan Motor’s manufacturing control system and strategy which employ connectivity to increase quality on the production floor. Under the expert hand of CEO Carlos Ghosn. The new plan presents a new challenge for Nissan’s manufacturing teams. and cost. centrally from my office. MANUFACTURING AND SUPPLY CHAIN. Tadao Takahashi EXECUTIVE VICE PRESIDENT. our objective is to improve lead times. Japan’s second largest auto manufacturer. Ltd. Nissan manufacturing: back in the black Kaizen. a Japanese concept which means continuous improvement. NISSAN MOTOR CO. LTD. Nissan Motor Co. We focus on improving the entire process. Before long. having one of its best financial results ever. I should be able to monitor what is happening everywhere. assess delays. quality. The results are compelling—the company is enjoying solid growth. with an increased global footprint—notably in China. Mississippi and in Smyrna. is back in the black and thriving. and are planning to use it soon in the United Kingdom. and introducing hot new products.. we have installed this system in Canton. In addition to Japan. and is realizing one of the highest returns in the auto industry.WE HAVE FOUND that the new plant can take over production of a new model in just six weeks. when it used to require up to six months. from product development to start of production.. Nissan’s manufacturing control system Nissan has developed a manufacturing control system that allows us to identify a problem immediately...

which are based mainly on paper manuals. Quality is of utmost importance. shows the direction of our mind-set and the actual activities for manufacturing on a global basis.S. connecting with distant robot systems through the Nissan global backbone wide-area network. and even digitized simulations of our standard manufacturing lines. or Japan. For example. we are currently changing our traditional training systems. the United Kingdom. and integration with our partners (suppliers). by sharing this information over the company’s intranet. and. suppliers. for Genba Kanri (a system that usually translates to “shop-floor management. The key features of our manufacturing systems are flexibility. By standardizing our assembly lines. consolidated view of what is going on in the United States. Large-capacity flexibility is easy. Based on a “humane and environment-friendly” ethos. including customers. and Europe to identify best practices. Flexibility. expensive. and ourselves. through which we seek total optimization of all stakeholders. Using connectivity to improve quality on the production floor Our manufacturing system. rather than information always being passed down from above. America. Now. Nissan can reconfigure machines to add a new model to the production line. Operators can now learn how to assemble parts and check quality by simply visualizing pictures and process steps studied and developed through our computer simulations. but until now it has been difficult to have a clear. Given Nissan’s ambitious growth objectives and the global volatility of the car market. If demand in the United States increases or shifts. and inefficient as people often were not prepared to adopt these practices. when it used to require up to six months. to facilitate continuous feedback from and to the plants. In a world where we are introducing 10 new models a year and growing our annual sales by 1 million vehicles. I encourage cross-fertilization to happen naturally through a Web-based environment where each plant can approach another plant directly. short lead time. to Web-based document-sharing and training systems integrated with our digitized simulation models. we need to adapt our U. with limited capacity and improved quality. plants accordingly. but now we are also starting to share pictures. which will provide us with a flexible. short lead time. In Japan. Of course. ultimately. to capture kaizen opportunities across our various locations. Whenever this system is in place—not all plants are standardized yet—we have found that the new plant can take over production of a new model in just six weeks. It was slow.C O N N E C T E D M A N U FA C T U R I N G N I S S A N M A N U FA C T U R I N G : B A C K I N T H E B L A C K connect operators on the floor and engineers in design centers. we were already exchanging data and information. and integration with our suppliers are the key features of our manufacturing system. We call this doukiseisan (synchronized production). everybody can adopt improvements introduced elsewhere. videos. we need lean facilities and no overcapacity. to introduce kaizen to other plants. we have two distinctive concepts that serve as the basis for the NPW: • Continuous douki (synchronization) with our customer needs • Continuous quest to identify problems and enact solutions Through these concepts. but their findings needed to be reviewed and officially approved. especially in launch periods when new products are introduced.” which essentially means that problems are solved and improvements are made at the actual place where they arise: on the shop floor). Audit teams used to visit multiple plants across Asia. Previously. our experts reduce the time it takes to reach a solution by remotely accessing information on quality deficiencies in Nissan’s connected manufacturing strategy We are currently introducing the Nissan Integrated Manufacturing System. the Nissan Production Way (NPW). standardized global 120 121 . small-capacity flexibility is the challenge. We practice kaizen everywhere in the world. Japan prototype center. paper manuals made it difficult to achieve the benefits of kaizen on a global scale. and by remotely supplying data developed in our Zama. production system. the power of distributed and standardized manufacturing is key to our flexibility— and to our ability to deliver and adapt to ever-changing customer needs across the globe. we try to achieve a manufacturing state that can cope with both customer and company needs.

and Iwaki plants and Production Control. At the same time. we can instantly identify problems. We currently have two Web-based systems. our experts reduce the time it takes to reach a solution by remotely accessing information on quality deficiencies in real time. Logistics. Ltd. makes it possible for us to obtain real-time line operation information at any time from each PC connected to Nissan’s intranet. methods.. and trouble-shooting) are shared globally to accelerate the realization of constant and seamless production (douki-seisan). and at the same time we will also be able to monitor problems remotely from Japan and provide relevant advice. NISSAN MOTOR CO. LTD. Using this system. and Overseas KD Production departments. and identifying their source by connecting to our information networks. This system is used mainly by our manufacturing. database technology. Spain. production operation. and Kyushu Plants.. while sitting in any office. and engineering sections. We will continue to dispatch a number of experts for the start of production to the United States. The first is a body shop equipment management system that can monitor equipment in one place. and chairman of Nissan Casting Australia Pty. and Mexico. This effective system. Fuji. In addition to line operation information. Smyrna. and Kyushu plants. before becoming a member of the board of directors in 1998 where he was in charge of the Yokohama. supply-chain management Cost Reduction Promotion Office. maintenance. Oppama. In Japan. NPW Promotion. as well as general manager of the Manufacturing and Industrial Engineering Division. and analyze faults. the United Kingdom. Takahashi became senior vice president in charge of the Manufacturing and Industrial Engineering division of the Oppama. This system has already been introduced to Nissan plants in Canton. recording. He was also general manager of the Manufacturing and Industrial division. as well as by our facilities design and process-design teams. and facility control know-how (such 122 123 . as inspection planning. and other locations. Nissan will build on its achievements and on the concepts of NPW and kaizen to introduce other information-sharing systems. He joined Nissan in 1968 after graduating from the University of Tokyo and held various managerial posts in production control and engineering. Tochigi. we make full use of it in real time to practice daily kaizen and stabilization of production capability. The second Web-based system we use is a vehicle-quality information system that enables us to share information on quality— both upstream and downstream of the manufacturing process—and to take action quickly. the system allows anyone to analyze line operations easily. In 2001. Shop supervisors can see the status of all shop equipment and quickly take the required action. quickly analyzing the root causes. Murayama. and industrial machinery/marine since June 2002. In Japan. In the future. quickly analyzing the root causes and identifying their source by connecting to our information networks. but it is our intention to pursue this in the near future. Therefore. We cannot yet fully realize this potential on a global basis. JAPAN Tadao Takahashi has been a member of the Nissan board of directors and executive vice president of manufacturing (vehicle and powertrain). find bottlenecks.. TADAO TAKAHASHI EXECUTIVE VICE PRESIDENT. which is connected to Nissan’s intranet via the database. China. We now can see what is happening on any line in any Nissan plant around the world. In 1999 he was senior vice president in charge of the Manufacturing and Industrial Engineering Division for the Oppama.C O N N E C T E D M A N U FA C T U R I N G N I S S A N M A N U FA C T U R I N G : B A C K I N T H E B L A C K real time. uniquely developed by Nissan. we will mix “live” and remote support. MANUFACTURING AND SUPPLY CHAIN. The operation information of all lines is automatically collected from each line’s programmable logic control device through SCADA (supervisory control and data acquisition) and sent to a Web server. Tochigi (excluding Powertrain Operations Division). with the goal of achieving douki-seisan on a global basis. Going forward. Tochigi. SCADA. the same productionoperation support system has been introduced in all domestic plants.

THERE’S A TRUE OPPORTUNITY in sharing information with our suppliers and empowering them to take action. product compositions. The more this data flow is consistent with the physical flow. for a considerable Michel Gornet EXECUTIVE VICE PRESIDENT. Small PCs have indeed replaced large. one of the greatest. Although IT brings more flexibility. clearly. RENAULT S. automated control chassis—sequential automats were replaced by programmable automats—which themselves were eventually replaced by computers. Manufacturing is the heart of our business INFORMATION TECHNOLOGY HAS A CRITICAL ROLE TO PLAY within Renault’s business—both in relation to manufacturing and in the day-to-day management and development of the business. and Internet technologies are far more reliable and faster than any other technology. On the manufacturing floor. the real breakthrough of information technology is in the plant-floor supply chain. so flow management is at the heart of what we do. lower costs. sourcing. The supply chain is. Car manufacturers are assemblers of complex and diversified objects. Car manufacturer supply-chain systems are extremely complex and require the right part at the right instant. Opportunities for connected manufacturing AT RENAULT. The flow of manufacturing information is indispensable to aligning delivery of components and parts simultaneously. the better. MANUFACTURING. Indeed. We’re in a business where everything is real-time and interdependent.. and so on) with physical operations a long time ago. and more effectiveness in the manufacturing process. so we need to know which colour of paint needs to be sprayed on a car the very second it passes in front of the painting booth. FRANCE 125 . There are a number of significant opportunities for connected manufacturing. in the right place. numerous pieces of information are now exchanged on the plant floor. WE INTERCONNECTED INFORMATION SYSTEMS (parts nomenclature.A. the value of new technologies and the Internet is not really in the production act itself.

The Modus is produced on the same line as other models.C O N N E C T E D M A N U FA C T U R I N G M A N U FA C T U R I N G I S T H E H E A R T O F O U R B U S I N E S S variety of parts and manufacturing steps. as build-to-order takes further prevalence with shorter and shorter lead times. giving up the arcane vocabulary developed by IT. access all the relevant supply-chain information (in-bound parts as well as stockouts) and manage all personnel administrative tasks. The real breakthrough of information technology is in the plant-floor supply chain. In 1999. I must admit. supervisor). this process typically occurs on the same site as the assembly line. These tools opened up the operation silos. Renault launched an ambitious programme redefining and redeploying the Renault production system (SPR). the under body. Moreover. or BUW is a cell of 20 people—the first level where one finds a . Given the size. time. for example. cost. paint preparation. the application of protective coatings and the actual paint job. data and activities to fulfil the mission). you can radically reduce the number of breakdowns. is the emergence of information networks with everyone connected to a common intranet. so Renault is compelled to supply these flows with a certain degree of control. engine and tyres are installed along the conveyor. made all the more easy when connected with powerful and performing information systems. safety) a reference set of activities and solutions for each BUW desktop (specific indicators. For convenience. the car goes through very different technical operations: body assembly. understandable. and replenish them to cope with a more volatile and diverse consumer demand. So. some hand-fitting. however. Improving manufacturing technology and assets is another area of opportunity—by having more machine intelligence. the vehicle is ready to be tested before being delivered to a Renault auto dealer. In the early stages of deployment to the plant floor. SPR was meant to enhance the management and control of each basic unit of work. Lean manufacturing and just-in-time processes are the only way to manage diversity. personnel management. At the end of the process. but it could be located elsewhere. as these sheets are cumbersome. To assemble a car in a typical factory. The objective of the SPR was to bring the Renault group to world-class levels of performance with two fundamental principles: total quality management and lean manufacturing. however. operation unit managers can now monitor their operations. 126 127 . The biggest revolution. from one building to the other. that we still have some progress to make in that area. the company intranet. until the car is driven out of the factory. robot welding. From their desks. it is an illusion to believe that we can keep in stock all the required parts and components. complexity. Special attention was given to defining an actionoriented. common vocabulary. the complexity of desktop solutions was highlighted as the greatest timeimprovement opportunity for heads of basic units of work (a basic unit of work. All along the process. brought the infrastructure needed to push a set of services to access information. the line is no longer dedicated to one single model like the Modus. Their goal was to define by scope of activity (quality. Today. Cross-functional teams were created with more than 100 people coming from factories around the world with support from headquarters. All this didn’t exist 10 years ago. The rise of information networks Considerable changes in the manufacturing process over the past decade have been driven by the shift to just-in-time manufacturing. resource performance. and variety of current car offerings. We know how to adapt existing assembly lines and painting booths to new models. which will be gradually assembled through successive operations. flow. and the sides of the vehicle. you start with stamping—a discrete process where metal sheets are formed.” At a technical level. and managers can personalise their portals. Then comes the assembly line—a chain of successive steps starting with welding of the floor. The experience of Nissan—with whom we are collaborating to boost performance—in leading-edge production systems played a key role in this initiative. So connected manufacturing is all about managing flows of information as much as it is about inventory management. information systems need to be evermore adaptive. information. information is now shared across discrete operations. the ability to capture and understand what’s happening on the plant floor and machines that can self-analyse root causes. called Déclic. dashboards. environment. “to open application X” was replaced by “checking the performance of the working units. Then all components necessary to finish the vehicle are assembled: seating. apart from the stamping. The implementation of these principles and the operating rules of the SPR led to a new distribution of the roles and missions of the entire hierarchical line in Renault’s manufacturing.

A. and retail. Anticipated productivity gains have been achieved with up to a 25 per cent reduction in administration time and savings of up to 30 minutes per day. Adoption of the portal has been extensive. a customisable dataaccess tool and dynamic links to online files and directories. RENAULT S. that total increased to 43 per cent—an annual purchasing volume of US$21.W/Paint department at the Flins plant in 1979. These include remote maintenance and video quality checks. In a way. Together. and this pace is continuing—thanks to highly efficient IS/IT systems. 129 . Gornet was appointed head of the production department’s Programs Unit in 1975 and became head of the B. At one point. The master plan is to increase velocity—to step up the speed of design. it’s hard to predict how manufacturing will look in 10 years’ time. Renault-Nissan Purchasing Organisation. in 1994. in July 2002. is also part of the strategic plan. dynamic links give one-click access to files and directories. This was rolled out in more than 14 plants in Europe. In some instances. however. MANUFACTURING.” but we didn’t come up with as much as we hoped for. but we haven’t implemented it yet. It was created in 2001 to manage 30 per cent of the total annual purchasing of Renault and Nissan with online systems. engineering. order status update and maintenance status. then general manager of the SanBUWville plant in 1989. quality defect declaration and online training registration. such as nonconformity forms and personnel planning. He is a graduate of the Ecole Polytechnique engineering school. FRANCE Michel Gornet is executive vice president of manufacturing and a member of the Renault Group Executive Committee. engineers from both companies can work together from distant parts of the world through the communication tools and connections that are now in place. Today. we asked a team of young professionals “to dream and invent the plant of the future. quality levels.5 billion. the plant is taking advantage of connectivity more than the office. monthly budget. histories and time zones. Gornet was appointed general manager of the Billancourt plant in 1986. to deliver cost-effective systems and optimised infrastructure for the two groups’ IS/IT departments. machines communicate with maintenance personnel and call for maintenance in case of breakdown. however. The comprehensive dashboard page displays all the relevant indicators of the BUW—including hourly production. manufacturing. He became director of body assembly in 1992. that our nextgeneration manufacturing will connect our plant with our suppliers via the Internet on a collaborative hub. in France. Our production systems can do that today. Gornet joined Renault in 1968 at the Billancourt plant’s Powertrain Manufacturing department.. In 1971 he was assigned to the manufacturing department’s Unisurf project. I do believe. Renault and Nissan have been able to launch between seven and 10 new products since 2002. The future Looking to the future. The expectation is that employees in every function within both companies will learn to use online collaboration tools to transform the way they work. accessible over the Renault global intranet. There’s a true opportunity in sharing information with our suppliers and empowering them to take action. By 2002. Another joint company. In 1983 he joined the personnel department with the Employee Forward Planning Unit. Over and beyond that. RNIS serves as a global repository of core IT competencies that both companies can use to benefit the alliance—and is a much faster solution than creating such a facility within each company. The alliance’s evolving IP communications platform is making it easy for people to talk and work together more effectively across both companies. languages. Finally. The Renault–Nissan collaboration The success of this strategy has depended on a close working alliance between Renault and Nissan. To share leading practices. The alliance was created to help both Renault and Nissan identify ways to align processes in two organisations with different cultures. when he joined the Renault Management Committee.C O N N E C T E D M A N U FA C T U R I N G M A N U FA C T U R I N G I S T H E H E A R T O F O U R B U S I N E S S Three main intranet services were retained for Renault manufacturing: a comprehensive BUW dashboard. and all users are extremely happy and satisfied. The alliance’s evolving IP communications platforms are making it easy for people to talk and work together more effectively across both companies. and will roll out to the rest of the world within the next two years.I. 128 MICHEL GORNET EXECUTIVE VICE PRESIDENT. then senior vice president. we have identified a number of quick wins. The customisable data access tool gives one-click access to multiple data such as production schedules. the two companies established Renault-Nissan Information Services (RNIS). in-process production. manufacturing. and of the Harvard Business School.

We believe that the only way an organization can achieve this—and. there is a strong belief that manufacturing companies should be able to access real-time information on their plants from anywhere. ROCKWELL AUTOMATION INC. But the business world is moving toward this type of visibility as we move toward increasingly customized products and connected enterprises (see Figure 1). Benefitting from global supply-chain integration SUJEET CHAND of Rockwell Automation shows that the only way to stay competitive is to drive productivity and quality throughout the enterprise with highly connected systems.. at any time. ADVANCED TECHNOLOGY. We still have a way to go before this degree of visibility is as commonplace as. stay competitive—is to drive productivity and quality throughout the enterprise with highly connected systems. among consumers. Sujeet Chand CHIEF TECHNICAL OFFICER AND SENIOR VICE PRESIDENT. Rockwell Automation is a global provider of power. say. UNITED STATES 131 . tracking a package shipped by Federal Express or UPS. and information solutions for industrial automation.ONE OF THE MOST SIGNIFICANT TRANSFORMATIONS in the past decade has been the growth of the Internet and its immediate impact on global connectivity. THE GLOBAL ECONOMY and an increasingly competitive business environment are driving companies around the world to focus on how to maximize the productivity of their manufacturing plants. to compare efficiency and quality measurements. With a focus on automation solutions that help customers meet productivity objectives. there is already widespread acknowledgement that a connection between business systems—such as enterprise resource planning (ERP)—and manufacturing plants is required to drive plant efficiency and asset utilization. demand is growing for greater visibility of plant-floor data—for example. Meanwhile. control. And. Within businesses. ultimately. the ability to track the status of your order for a new Dell computer down to exactly where that computer is in terms of assembly and shipping.

Efficient management of inventories and other supply-chain operations requires 132 133 . such as the 21 CFR Part 11 federal regulations for electronic batch records from the U.4 billion. The first of these trends is supply-chain integration. This requires considerable flexibility in the manufacturing line. another for Tesco—to give their products a unique identity on retailers’ shelves. These five trends are driving increasing levels of connectivity not just on the factory floor. for example. So driving productivity from assets is critical. and logged securely. widget. and Rockwell Software. improve productivity. Dodge. Flexibility is becoming more important today. conserve resources. Whereas in the past. we have watched closely as industrial automation has evolved from point-to-point connections to networked systems. require factory operations and data to be electronically collected. used with permission.000 people worldwide with annual sales of US$4. but also between the factory floor and the business systems. Take the food industry. linked. with nearly 5. Figure 1 Rockwell Automation Inc. such as ERP software. This trend has to do with getting more out of capital investment in factories by helping to ensure that manufacturing plants are highly efficient and that they are producing high-quality products at a high turnover rate. The evolution from point-to-point connections to networked systems Over the past decade. including Allen-Bradley. drug companies are moving toward manufacturing customized medications and dosages by individual.S. And. The second trend is productivity and quality. Already. where manufacturers would like to create customized packages—one style of packaging for Wal-Mart. Global technical and customer service is an integral part of Rockwell Automation. which have become extremely important—especially because of open networks on the factory floor and the fact that factories are increasingly connected to higher-level systems that allow an external person to come in and take a look at what is going on inside the factory. The fifth trend focuses on flexible manufacturing. And in the pharmaceutical industry. and agents serving customers in 80 countries. The fourth trend is safety and security.C O N N E C T E D M A N U FA C T U R I N G B E N E F I T T I N G F R O M G L O B A L S U P P LY. or component repeatedly for a long period of time—change now occurs much more rapidly. Regulatory requirements. a manufacturing line would be designed to produce the same part. we bring together leading brands in industrial automation. we have seen five major trends drive greater connectivity within industrial automation. Rockwell Automation employs about 21. Food and Drug Administration. Reliance Electric. although flexibility is already increasing as a result of the global move toward mass customization. and reduce the time to market for material goods and services. The third trend is growing regulatory compliance requirements and the satisfying of mandates. Today. The company is financially and strategically focused on helping manufacturers use plant operations as a competitive advantage. very few customers are able to pull up a dashboard of metrics and compare plants globally. system integrators.C H A I N I N T E G R AT I O N Framework for optimized manufacturing Business Support Suppliers Customers Information Integration Order-Flow Management Design Performance Analysis Process Optimization Uptime & Reliability Visualization & Control connectivity between factories and business systems. best practices are clearly evident in the responses companies are making to each trend.600 distributors. Over the past decade we have watched closely as industrial automation has evolved from point-to-point connections to networked systems. to reduce costs..

Above that is the manufacturing execution system (MES) layer. or whatever network is available. or factory. and decision support. suppliers. Kraft’s use of the MES layer clearly demonstrates best practices in integration. level and elevate it to the next level using Ethernet.C O N N E C T E D M A N U FA C T U R I N G B E N E F I T T I N G F R O M G L O B A L S U P P LY.. quality measures. layer. and diagnostics. or automation. from 1995 to 1997. quality monitoring. raw material yield.6 million. Kraft recently completed the implementation of OEE at 48 plants in North America. and increase the payback through additional training. or whatever network is available. weight control. Kraft and Rockwell Automation plan to roll out full operator OEE to existing capacity-limited base OEE lines. level and elevate it to the next level using Ethernet. The company uses a large amount of Rockwell automation equipment mixed with legacy equipment and offerings from other vendors. meanwhile. and miscellaneous expenses. food service. covering almost 500 manufacturing lines. 134 135 . leading Kraft to conclude that collaborative manufacturing management drives asset reliability improvements. modify the central design to each line. linking collaborative manufacturing with modules for production reporting with Lot IDs. used with permission. we can identify three distinct hierarchical layers. Our role has been to take data from the automation. Kraft’s first pilot involved three plants and 64 production lines. So Kraft is now able to access real-time information about its plants globally. along with efficiency. which features solutions for compliance. you need to pass through the MES layer.C H A I N I N T E G R AT I O N Kraft totally connected manufacturing vision MRP Planning Asset Maintenance Labor Effectiveness Warehousing & Transportation Common Specs Asset Effectiveness Suppliers General Ledger ENTERPRISE LINKS Supply-Chain Systems Productivity Retail Downtime Yield Reporting CIP/ACS MES Repository Environmental Safety THE PLANT Comanufacturers PLANT FLOOR Real-Time Data Raw Data Real-Time OEE Utilities SPC HAACP Tracking • Order Compliance • Plant Yield • Yield VS Moisture Transactions Batch Management MES Rejected Waste Weight Control Order Config. Partnering with Kraft for this OEE rollout. Kraft’s vision is to be a totally connected company that links the plant floor through collaborative manufacturing management to the enterprise level. Over the next two years. overall equipment effectiveness (OEE) and downtime. Kraft monitored the savings. with more defined goals for connecting the factory-floor data to business systems. Food Service In a simplified view of an integrated factory. Our role has been to take data from the automation. Kraft’s collaborative manufacturing development group. overweight product. providing the ability to analyze the performance of different lines within the plants. standard loss allowance. The savings realized were more than $1. The lowest level is the factory. vendor-managed replenishment. Figure 2 Rockwell Automation Inc. enhance the financial reporting. Rockwell Automation has had a strategic supplier alliance with Kraft for many years. labor. which were categorized by line efficiency. Rockwell Automation set up implementation teams across North America to assess the current infrastructure and equipment. tracking and tracing. This relationship has evolved to provide significant levels of services and solutions. all without taking any line down during installation. and implement the design. We have worked with Kraft to link its plant-floor manufacturing automation investment with its front-office automation investment. So to go from factory data to ERP data. as well as to retail. make enhancements to the existing OEE applications. and so on. or factory. Best practices: integration Kraft Foods provides a good example of best practices in integration. maintenance. is currently developing additional financial reporting to add to all of their reports. and comanufacturers (see Figure 2). The top layer is the ERP system. which enable many other initiatives.

V In ve ow nti m ctio n dD wn tim nt or y Un pla n ne ed ov Pla M nn Do Tim o Pr o cti du p nS if ec tio ica ns rm r fo Pe an ce ta Da Performance Applications Plant Performance Decision Support • Order Compliance • Plant Yield • Yield VS Moisture • KPI Reporting Transactions Closed Loop Weight Ctrl Downtime Labor SPC ne tc. Ethernet will also support the functionality of specialized networks on the factory floor. the networks connect to a controller that bridges the information over to an information network. In the near future. It is one of several communication networks we support. a cost performance trade-off. This gap exists because the factory control does not talk the same language as IT systems. Within Rockwell Automation. The cost per node of a bit-level network is significantly less today than the cost of an Ethernet node. Instead. we will implement it. we note that a typical factory will have several networks (see Figure 3). We are following that trend and support Ethernet IP solutions so that if a customer wants to use it for real-time control.C H A I N I N T E G R AT I O N Collaborative manufacturing overview Enterprise Financial Reporting Labor Effectiveness Workforce Labor to Machine Downtime MRP Schedule Maintenance Yield Warehouse Invoice Shipment Planning Common Specs Change Mgnt Asset Effectiveness Productivity Actu als Pro du e. Such networks must be deterministic. These sort of networks are not designed to move a lot of traffic—for example. we use our ERP system to drive the efficiency and productivity of our factories and business operations to increasingly higher levels. used with permission. the cost will continue to come down and Ethernet connectivity will be built into processing engines that can be bought from Intel or other vendors. Both come through improving the efficiency of the supply chain and being able to process customer orders and log what they want on a daily basis. Performance Storage and Retrieval HACCP Tracking Food 201 CIP/ACS Food 201 Real-time OEE Order Cooling ibr ati o Rockwell Automation also supports Ethernet as a low-level control network. Raw Data Connectivity: Business Benefits Estimating the tangible business benefits of connectivity between the factory and business systems is extremely important. there are one or more networks for connecting sensors and actuators. All of this data gets placed in a single repository and is connected. Factoryfloor people and IT people are coming together more and more. 136 od Pr tio uc nA ctu als Process Control Systems ction S le chedu s We see Ethernet as the fastest-growing network in industrial automation. As the number of Ethernet nodes increases. How companies should use connectivity Looking at connectivity in a factory environment today. Ethernet is rapidly becoming the network of choice for the exchange of “higher-level” data or information in industrial automation. will greatly influence the connectivity of the factory floor to business systems. Over time. such as Ethernet. There is. and that is where networks. the other primary ones are DeviceNet and ControlNet. making it difficult to link all these different pieces of data. however. R un e e. We utilize a common. We are not concerned about the determinism or performance of Ethernet because we have learned through laboratory trials that we can achieve adequate real-time performance by appropriately architecting Ethernet segments. But that is going to change. which allows easy bridging between multiple networks that support this protocol. We see Ethernet as the fastest-growing network in industrial automation. fit in. The immediate paybacks are in better inventory and raw material management. It is open technology—we are a strong proponent of open networks and interoperability—and it has been a successful strategy because it aligns well with our customers’ needs. which are designed for real-time performance. such as safe networks for safety applications.C O N N E C T E D M A N U FA C T U R I N G B E N E F I T T I N G F R O M G L O B A L S U P P LY. Ethernet and the emerging worldwide Web standards. such as DeviceNet and Foundation Fieldbus. At the lowest level. in the past this data was available piecemeal. es Produ Batch Management Yield Reporting Enviromental Safety Performance Trends Plant Floor Finance Weight Control Figure 3 Rockwell Automation Inc. such as Web services. No one 137 .. The gap between the IT world and the factory-floor controls is a fundamental problem that exists today. open application protocol called the common industrial protocol. whereas. multimedia data such as video messages.



can afford the luxury of a “silo mentality” any more. In the past, I rarely saw IT people on the factory floor. But today, many factory-floor automation decisions also involve an IT person because many of our customers no longer separate IT from factory-floor investments.

In the near future, Ethernet and the emerging worldwide Web standards, such as Web services, will greatly influence the connectivity of the factory floor to business systems.
In the late 1990s, much investment was placed in the IT area— installing ERP, bandwidth, and infrastructure. Now it’s payback time. That’s where the MES layer and our FactoryTalk architecture fit in. We provide common services, such as uniform access to factory data and integrated security. Software applications can use these common services to access and integrate factory-floor data, and then write it to databases such as Oracle or SQL, which IT systems are well versed at supporting. Also, we provide a software framework for integrating legacy applications and data. So we can take the data from the factory floor and move it into the domain of IT almost seamlessly. By using the intermediate MES layer to keep this architecture open, you can continue to expand the amount of data moving from the factory to the IT world. A customer who makes car seats for minivans is an example of using the MES layer to establish connectivity between the factory floor and ERP. This customer needed to track and trace all of the components that go into the car seat—using identifiers, such as bar codes or radio frequency identification (RFID) tags, on different components—before the car seats were assembled. Although the number of seats made each day varied depending on customer demand, having the manufacturing data connected to the ERP system allowed for daily adjustments on the factory floor. So now the company’s ERP system receives the production quota (from customers) daily and comes up with a schedule for the manufacturing line to produce that exact number of seats. This happens automatically, and when these seats are manufactured and shipped to an automotive company for incorporation into a vehicle, linkage between the vehicle ID number and seat ID number is established. If there is a problem with a car seat in a minivan, it can be traced all the way back to the car-seat manufacturer, and that manufacturer can identify every component in the seat and when it was made. 138

It is important to manage the expectations of such integration between factory automation and ERP. Implementing an ERP system and connecting it to manufacturing is not like flipping a switch. You cannot just put a multimillion-dollar investment into ERP software and instantly switch everything over to the new ERP system. You have to start small with selected applications—picking those that are not the most challenging—as early pilots. The focus should be on building an architecture that allows you to expand. By retaining control over a gradual rollout, you can expand in stages to include integration of performance measures, maintenance, and asset management solutions. And this, in turn, leads to flexible manufacturing and integration—it can just keep building from there. This brings me to technologies, such as RFID and wireless communications, which introduce a new level of integration and exciting new ways of creating visibility across the manufacturing value chain.

Radio Frequency Identification Tags
RFID is one of a number of identifiers that can be used to deliver a high degree of detailed tracking. While not a new technology, RFID has recently become a hot topic with manufacturers, particularly companies in the consumer segment. Global companies, such as Wal-Mart, Tesco, Marks and Spencer, and Nokia, are implementing certain aspects of RFID. Meanwhile several industry groups, are driving their own requirements, affecting manufacturers and suppliers alike. The potential benefits to large suppliers deploying RFID on a wide scale across the supply network are now well documented. Across the industry, companies with better demand forecast accuracy also have 15 percent less inventory, a 17 percent improvement in order ratings, and 35 percent shorter cash-to-cash cycle times than their peers. RFID efforts aimed at inventory visibility across the supply chain are closely tied to the control systems and execution processes driving production. Control systems that drive manufacturing execution need to be modified to fully realize the proposed benefits of RFID. Retooling manufacturing assets, revamping execution strategies, recalibrating plant-level information systems, and integrating new RFID-enabled manufacturing data into enterprise systems will be critical for synchronizing the plant floor with the RFID-enabled supply chain. Fullscale RFID deployment and its impact on manufacturers, suppliers, and consumers may potentially take several years, depending on existing and developed technology and return on investment (ROI) projections in the early adoption stage. 139



Rockwell Automation is not obliged to use RFID tagging on its products; we do not directly supply the retail or defense communities, so our products do not come under any mandates. To assist our customers with their RFID implementations, and also to use this technology for improving our own distribution operations, we decided to conduct an RFID pilot. A year ago, we began to tag a selected number of individual product items (rather than cases or pallets). We tagged individual printed circuit boards at one of our factories before shipping to our distribution center in Champaign, Illinois. We changed the inventory software in our Champaign distribution center to start working with RFID. In addition, we started collecting metrics and data, and gained experience in what it means to implement RFID in our own facility before we went out to assist our customers in implementing the technology. This project activity included the use of RFID technology in parallel with existing bar-coding methods, integration of RFID information with existing databases, and reliability studies that included tag and reader selection. This RFID pilot also included a business case analysis that assessed business process changes related to quality and verification procedures, and the future impact on annual labor costs, labor force counts, order cycle times, and order throughput associated with the RFID implementation. The analysis illustrated a significant benefit—a 70-percent reduction in quality loop reworks.

reduced by 70 percent. We also showed improved inventory control, and we are hoping to get about 17-percent reduction in labor costs. We believe RFID is going to start moving back from the distribution centers into the factory. The reason is simple: you get a significantly higher ROI when you tag your case, pallet, or product in the factory. Tagging at the factory helps ensure the association of all of your manufacturing data with the RFID tag, and the same tag also can be used for tracking the object(s) in the factory. The power of RFID comes from making RFID a common key to information—from the birth of the product to its sale and eventually to its disposal.

Wireless technology for connectivity
Another growing trend in industrial automation is wireless technologies. For example, at a major consumer goods plant in Europe, we recently implemented a wireless solution for automated guided vehicles (AGVs) to move product from one place to another, and to communicate with a central controller. This was all done with wireless communications because AGVs are mobile. Today, many companies are deploying wireless technology in factory automation for applications where it is difficult to run wire, such as overhead cranes, for example. Signal reliability and security are two important attributes for use of wireless networks in factories. Another enabler for widespread deployment of wireless technology is a power source that is not a battery; you cannot just install 1,000 wireless sensors and tell the plant-floor personnel to replace batteries periodically on every sensor—it is just not logistically feasible. So we are actively researching ways to power wireless radios automatically. If we can power a radio by using robots in a factory— using equipment that moves, “parasitic power”—we believe this will kick-start widespread use of wireless sensors. We are conducting a joint experiment with British Petroleum for which we placed energyscavenging wireless sensor networks on a BP tanker for collecting diagnostics information. We are working today to drive the rollout of wireless by eliminating the need for a battery, and to help ensure reliability and security. In addition to wireless, we also are looking at power-line technologies—power-line communications—as an alternative because power lines do run throughout a factory. Power-line technologies could be an alternative to wire-reduction technologies which, of course, is what wireless is.

Today, many companies are deploying wireless technology in factory automation for applications where it’s difficult to run wire—overhead cranes, for example.
This means that when we ship the product to a customer, we successfully match the product to the customer order. We have a highly automated distribution center with boxes that move to different stations, and operators drop in different pieces of product based on what a customer ordered. When the box goes to the packaging point where the product is packaged and shipped, we do a scan using RFID and pick out exactly what is in the box and match it to the customer order, verify that it is the right set of products that the customer ordered, and ship it. So the quality loop rework at the very end of the line was





Manufacturing growth in the Far East is driving greater global connectivity
A future challenge—and impetus—for connectivity of industrial automation systems, however, comes not from developed Western markets, but from territories that are increasingly taking on global manufacturing capacity—China, for example, or other countries in Asia-Pacific or eastern Europe. Our observation has been that although factories in China may adopt a labor-intensive approach initially to take advantage of cheaper labor, China continues to lead the world in lost manufacturing jobs year after year. China eliminated 15 percent of its manufacturing workforce in 2003, not due to lack of investment or because factories aren’t being built, but because there is greater automation and more productivity in China’s factories. This is a positive trend, and we see significant growth of our business in China. It is a vibrant region in terms of finding places to apply automation technologies. Many multinational companies are incorporating modern infrastructure into the plants they’re building in China, and this will continue to accelerate—just as it did in industrialized countries, except at a much faster pace. So China will most likely miss the growing pains of the industrial revolution we experienced when we went from highly manual plants to automation slowly over time.

The U.S. Federal Drug Administration is not going to relax its guidelines for products made in China; the same guidelines, quality levels, and checks and balances will apply to products made anywhere in the world. Wal-Mart is not going to excuse Chinese manufacturers from placing RFID tags on their cases and pallets. So a Chinese plant cannot be built in isolation from what is happening in global technology trends. If you are building plants anywhere in the world, you have to build stateof-the-art facilities that are compatible with global standards and produce the same quality of product as any other part of the world.

It is amazing how quickly things can change. One of the most significant transformations in the past decade has been the growth of the Internet and its immediate impact on global connectivity. Industrial automation is benefiting from this change through the adoption of Ethernet and worldwide Web technologies for greater interoperability and connectivity. The global economy is driving greater distribution of manufacturing and logistics operations, and the only way to stay competitive is to drive productivity and quality throughout the enterprise through highly connected systems.

SUJEET CHAND CHIEF TECHNICAL OFFICER AND SENIOR VICE PRESIDENT, ADVANCED TECHNOLOGY, ROCKWELL AUTOMATION, INC., UNITED STATES Sujeet Chand is senior vice president for advanced technology and chief technical officer for Rockwell Automation. He started his career at General Electric in the Industrial Automation Lab, where he developed control algorithms for GE’s robot controller. Chand worked as a systems engineer on several product development projects at Allen-Bradley Company. He spent 11 years at Rockwell Science Center, where he held positions of director, information sciences, and manager and principal scientist for the Control and Signal Processing department. Prior to joining Rockwell Automation, Chand served as chief operating officer for a software start-up company, where he successfully led the engineering and development of a suite of software products and grew the business to profitability in 18 months. Chand holds a master’s degree and doctoral degree in electrical engineering from the University of Florida. He has published more than 50 technical papers and holds four patents.

If you’re building plants anywhere in the world, you’ve got to build state-of-the-art facilities that are compatible with global standards and produce the same quality of product as any other part of the world.
Global competitiveness will continue to be the driving factor for the growth of manufacturing in China. If companies can produce the same product somewhere else at a significantly lower cost while maintaining quality, they’ll go there. Otherwise, they will lose their competitive edge. To maintain quality when moving production to another part of the world, you must have the same—if not greater— level of automation.



Order online at www. innovators. and includes a range of essays from many of the world’s leading 144 .C O N N E C T E D M A N U FA C T U R I N G The Connected Series Thought-provoking essays from industry leaders A series of books covering top-of-mind issues across a range of public and private industry sectors. Each book presents a Cisco perspective on the sector. and

back-office reorganization. has collected essays that show how different cities are grappling with the various stages of connectivity.Connected Cities Edited by Simon Willis The ideas explored in Connected Cities chart the emergence of a political and economic phenomenon—the city as the connected republic of the 21st century. and visionaries from a wide range of segments of the transportation industry. governance. global head of e-government for the Cisco Internet Business Solutions Group. Connected Workforce Edited by Simon Aspinall and Anja Jacquin Langer Mobility has been critical to human survival since the beginning of history. with the goal of helping service providers adapt to and profit from this opportunity. The collection of essays in Connected Workforce brings together the views of senior business leaders and renowned market innovators on how mobility is changing their business practices and shaping our future. and social inclusion. senior business executives. education is the prime driver for economic growth. national e-government strategies. ISBN 0-9546445-6-5 160 x 240mm 152 pages ISBN 0-9551959-0-X 160 x 240mm 144 pages . and prosperity. and Howard Lock In Connected Transportation. In this exciting age. Connected Government Edited by Willi Kaczorowski Connected Government consists of 14 essays from leaders in national governments. and how they are using new technology and the Internet to drive change. ISBN 0-9546445-8-1 160 x 240mm 152 pages ISBN 0-9546445-1-4 160 x 240mm 116 pages Connected Health Edited by Kevin Dean Healthcare is consistently debated and is the highest priority on the agenda of citizens. and opportunities that lie ahead. the editors bring together perspectives from industry CEOs. alternative service providers. Syed Hoda. public servants. This selection of essays provides a look at the forces that are shaping the consumer broadband market. Virtually every service provider is attempting to capture this still-nascent but exploding market—from incumbents. and nowhere is this more evident than in the arena of consumer broadband. ISBN 0-9546445-5-7 160 x 240mm 168 pages New Title Connected Transportation Edited by Pravin Raj. viable strategies for meeting its challenges. authorities. and examines the issues involved in developing and implementing compelling. where connectivity delivers information at unprecedented speeds and in multiple formats. outlines the concept of a connected government. and creates opportunities for new partnerships. Simon Willis. The advent of the Internet and communication technologies is changing the way we provide care. This collection of essays stretches the intellect and highlights the drivers for changing the way information is used to deliver better. ISBN 0-9546445-0-6 160 x 240mm 116 pages ISBN 0-9546445-9-X 160 x 240mm 144 pages Connected Schools Edited by Michelle Selinger We live in a knowledge society. These essays explore the current state of the industry. It explores the connected government strategy. faster. Connected Schools demonstrates how governments across the world are realizing the need to focus resources on the evolution of their educational systems. and cable and satellite operators to mobile and Internet portals. new organizational models. standardized common infrastructure. which is built on six pillars: citizen centricity. peace. and lower-cost healthcare using real-world experience. Connected Homes Edited by Fernando Gil de Bernabé y Varela The communications industry is undergoing massive change. and nations.

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